Correlation Between Samsung Electronics and NOV

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

Diversification Opportunities for Samsung Electronics and NOV

-0.4

Correlation Coefficient

Samsung Electronics  NOV

Very good diversification

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

Pair Corralation between Samsung Electronics and NOV

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the NOV. In addition to that, Samsung Electronics is 12.51 times more volatile than NOV Inc. It trades about -0.07 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.22 per unit of volatility. If you would invest  32,092  in NOV Inc on September 23, 2024 and sell it today you would earn a total of  152.00  from holding NOV Inc or generate 0.47% return on investment over 90 days.

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

Samsung Electronics Co  vs.  NOV Inc

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.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV 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 NOV

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

The idea behind Samsung Electronics Co and NOV Inc 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.