Correlation Between Samsung Electronics and London Security

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

Diversification Opportunities for Samsung Electronics and London Security

-0.08

Correlation Coefficient

Samsung Electronics  London Security

Good diversification

The 3 months correlation between Samsung and London is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and London Security go up and down completely randomly.

Pair Corralation between Samsung Electronics and London Security

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the London Security. In addition to that, Samsung Electronics is 1.2 times more volatile than London Security Plc. It trades about 0.0 of its total potential returns per unit of risk. London Security Plc is currently generating about 0.04 per unit of volatility. If you would invest  282,151  in London Security Plc on November 21, 2024 and sell it today you would earn a total of  72,849  from holding London Security Plc or generate 25.82% 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.  London Security Plc

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.

London Security Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in London Security Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, London Security may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Samsung Electronics and London Security

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

The idea behind Samsung Electronics Co and London Security 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.