Correlation Between Samsung Electronics and Faron Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Faron Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Samsung Electronics and Faron Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung Electronics Co and Faron Pharmaceuticals Oy, you can compare the effects of market volatilities on Samsung Electronics and Faron Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Samsung Electronics with a short position of Faron Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Faron Pharmaceuticals.

Diversification Opportunities for Samsung Electronics and Faron Pharmaceuticals

-0.18

Correlation Coefficient

Samsung Electronics  Faron Pharmaceuticals

Good diversification

The 3 months correlation between Samsung and Faron is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Faron Pharmaceuticals Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faron Pharmaceuticals and Samsung Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Samsung Electronics Co are associated (or correlated) with Faron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faron Pharmaceuticals has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Faron Pharmaceuticals go up and down completely randomly.

Pair Corralation between Samsung Electronics and Faron Pharmaceuticals

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.95 times less return on investment than Faron Pharmaceuticals. But when comparing it to its historical volatility, Samsung Electronics Co is 1.74 times less risky than Faron Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Faron Pharmaceuticals Oy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,250  in Faron Pharmaceuticals Oy on December 5, 2024 and sell it today you would earn a total of  1,400  from holding Faron Pharmaceuticals Oy or generate 8.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Samsung Electronics Co  vs.  Faron Pharmaceuticals Oy

Samsung Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Faron Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Faron Pharmaceuticals Oy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Faron Pharmaceuticals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Samsung Electronics and Faron Pharmaceuticals

The main advantage of trading using opposite Samsung Electronics and Faron Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Faron Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Faron Pharmaceuticals will offset losses from the drop in Faron Pharmaceuticals' long position.

The idea behind Samsung Electronics Co and Faron Pharmaceuticals Oy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.