Correlation Between Samsung Electronics and Scandinavian Tobacco

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

Diversification Opportunities for Samsung Electronics and Scandinavian Tobacco

0.33

Correlation Coefficient

Samsung Electronics  Scandinavian Tobacco

Weak diversification

The 3 months correlation between Samsung and Scandinavian is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between Samsung Electronics and Scandinavian Tobacco

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 3.46 times less return on investment than Scandinavian Tobacco. In addition to that, Samsung Electronics is 2.36 times more volatile than Scandinavian Tobacco Group. It trades about 0.05 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.37 per unit of volatility. If you would invest  9,565  in Scandinavian Tobacco Group on December 2, 2024 and sell it today you would earn a total of  1,355  from holding Scandinavian Tobacco Group or generate 14.17% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Scandinavian Tobacco Group

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.

Scandinavian Tobacco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Scandinavian Tobacco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Scandinavian Tobacco

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

The idea behind Samsung Electronics Co and Scandinavian Tobacco Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.