Correlation Between Samsung Electronics and Applied Materials

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

Diversification Opportunities for Samsung Electronics and Applied Materials

0.6

Correlation Coefficient

Samsung Electronics  Applied Materials

Poor diversification

The 3 months correlation between Samsung and Applied is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Applied Materials go up and down completely randomly.

Pair Corralation between Samsung Electronics and Applied Materials

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.1 times more return on investment than Applied Materials. However, Samsung Electronics is 1.1 times more volatile than Applied Materials. It trades about -0.07 of its potential returns per unit of risk. Applied Materials is currently generating about -0.13 per unit of risk. If you would invest  97,950  in Samsung Electronics Co on September 12, 2024 and sell it today you would lose (5,800) from holding Samsung Electronics Co or give up 5.92% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  Applied Materials

Samsung Electronics

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Applied Materials 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 Applied Materials

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

The idea behind Samsung Electronics Co and Applied Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.