Correlation Between Samsung Electronics and Shell Plc

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

Diversification Opportunities for Samsung Electronics and Shell Plc

0.6

Correlation Coefficient

Samsung Electronics  Shell Plc

Poor diversification

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

Pair Corralation between Samsung Electronics and Shell Plc

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.27 times less return on investment than Shell Plc. In addition to that, Samsung Electronics is 1.74 times more volatile than Shell plc. It trades about 0.09 of its total potential returns per unit of risk. Shell plc is currently generating about 0.2 per unit of volatility. If you would invest  241,688  in Shell plc on December 30, 2024 and sell it today you would earn a total of  37,962  from holding Shell plc or generate 15.71% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Shell plc

Samsung Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Samsung Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shell plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shell plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Shell Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Shell Plc

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

The idea behind Samsung Electronics Co and Shell 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.