Correlation Between Samsung Electronics and Prudential Financial

Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on Samsung Electronics and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Prudential Financial.

Diversification Opportunities for Samsung Electronics and Prudential Financial

-0.13

Correlation Coefficient

Samsung Electronics  Prudential Financial

Good diversification

The 3 months correlation between Samsung and Prudential is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Prudential Financial go up and down completely randomly.

Pair Corralation between Samsung Electronics and Prudential Financial

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.27 times more return on investment than Prudential Financial. However, Samsung Electronics is 1.27 times more volatile than Prudential Financial. It trades about -0.01 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.1 per unit of risk. If you would invest  95,750  in Samsung Electronics Co on December 2, 2024 and sell it today you would lose (2,500) from holding Samsung Electronics Co or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Samsung Electronics Co  vs.  Prudential Financial

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Prudential Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Samsung Electronics and Prudential Financial

The main advantage of trading using opposite Samsung Electronics and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.

The idea behind Samsung Electronics Co and Prudential Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.