Correlation Between Samsung Electronics and Star Diamond

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

Diversification Opportunities for Samsung Electronics and Star Diamond

0.68

Correlation Coefficient

Samsung Electronics  Star Diamond

Poor diversification

The 3 months correlation between Samsung and Star is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Star Diamond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Diamond 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 Star Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Diamond has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Star Diamond go up and down completely randomly.

Pair Corralation between Samsung Electronics and Star Diamond

Assuming the 90 days horizon Samsung Electronics Co is expected to under-perform the Star Diamond. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 8.57 times less risky than Star Diamond. The stock trades about -0.19 of its potential returns per unit of risk. The Star Diamond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.70  in Star Diamond on September 2, 2024 and sell it today you would lose (0.90) from holding Star Diamond or give up 33.33% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  Star Diamond

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Star Diamond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Diamond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Star Diamond reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Star Diamond

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

The idea behind Samsung Electronics Co and Star Diamond 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 .