Correlation Between Samsung Electronics and Cairn Homes

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

Diversification Opportunities for Samsung Electronics and Cairn Homes

-0.4

Correlation Coefficient

Samsung Electronics  Cairn Homes

Very good diversification

The 3 months correlation between Samsung and Cairn is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Cairn Homes go up and down completely randomly.

Pair Corralation between Samsung Electronics and Cairn Homes

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Cairn Homes. In addition to that, Samsung Electronics is 1.46 times more volatile than Cairn Homes PLC. It trades about -0.07 of its total potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.01 per unit of volatility. If you would invest  17,540  in Cairn Homes PLC on October 21, 2024 and sell it today you would lose (40.00) from holding Cairn Homes PLC or give up 0.23% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  Cairn Homes PLC

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 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.

Cairn Homes PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cairn Homes PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cairn Homes is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Samsung Electronics and Cairn Homes

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

The idea behind Samsung Electronics Co and Cairn Homes PLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.