Correlation Between Samsung Electronics and Wearable Devices

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

Diversification Opportunities for Samsung Electronics and Wearable Devices

0.29

Correlation Coefficient

Samsung Electronics  Wearable Devices

Modest diversification

The 3 months correlation between Samsung and Wearable is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices 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 Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Wearable Devices go up and down completely randomly.

Pair Corralation between Samsung Electronics and Wearable Devices

Assuming the 90 days horizon Samsung Electronics is expected to generate 8171.81 times less return on investment than Wearable Devices. But when comparing it to its historical volatility, Samsung Electronics Co is 3554.27 times less risky than Wearable Devices. It trades about 0.09 of its potential returns per unit of risk. Wearable Devices is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.28  in Wearable Devices on September 29, 2024 and sell it today you would earn a total of  30.72  from holding Wearable Devices or generate 10971.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.61%
Values	Daily Returns

Samsung Electronics Co  vs.  Wearable Devices

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. Despite nearly stable essential indicators, Samsung Electronics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Wearable Devices

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Samsung Electronics and Wearable Devices

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

The idea behind Samsung Electronics Co and Wearable Devices 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .