Correlation Between Samsung Electronics and Home Depot

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

Diversification Opportunities for Samsung Electronics and Home Depot

-0.88

Correlation Coefficient

Samsung Electronics  Home Depot

Pay attention - limited upside

The 3 months correlation between Samsung and Home is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Home Depot go up and down completely randomly.

Pair Corralation between Samsung Electronics and Home Depot

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Home Depot. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.01 times less risky than Home Depot. The stock trades about -0.09 of its potential returns per unit of risk. The The Home Depot is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  821,636  in The Home Depot on September 16, 2024 and sell it today you would earn a total of  15,864  from holding The Home Depot or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Samsung Electronics Co  vs.  The Home Depot

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Home Depot

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Home Depot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Home Depot

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

The idea behind Samsung Electronics Co and The Home Depot 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.