Correlation Between Samsung Electronics and American International

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

Diversification Opportunities for Samsung Electronics and American International

-0.62

Correlation Coefficient

Samsung Electronics  American International

Excellent diversification

The 3 months correlation between Samsung and American is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and American International go up and down completely randomly.

Pair Corralation between Samsung Electronics and American International

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the American International. In addition to that, Samsung Electronics is 1.73 times more volatile than American International Group. It trades about 0.0 of its total potential returns per unit of risk. American International Group is currently generating about 0.06 per unit of volatility. If you would invest  110,917  in American International Group on October 5, 2024 and sell it today you would earn a total of  40,433  from holding American International Group or generate 36.45% return on investment over 90 days.

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

Samsung Electronics Co  vs.  American International Group

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

American International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, American International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Samsung Electronics and American International

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

The idea behind Samsung Electronics Co and American International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..