Correlation Between Samsung Electronics and Komatsu

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

Diversification Opportunities for Samsung Electronics and Komatsu

-0.55

Correlation Coefficient

Samsung Electronics  Komatsu

Excellent diversification

The 3 months correlation between Samsung and Komatsu is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Komatsu go up and down completely randomly.

Pair Corralation between Samsung Electronics and Komatsu

Assuming the 90 days horizon Samsung Electronics Co is expected to under-perform the Komatsu. In addition to that, Samsung Electronics is 1.22 times more volatile than Komatsu. It trades about -0.14 of its total potential returns per unit of risk. Komatsu is currently generating about 0.08 per unit of volatility. If you would invest  2,345  in Komatsu on September 12, 2024 and sell it today you would earn a total of  216.00  from holding Komatsu or generate 9.21% 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.  Komatsu

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.

Komatsu

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Samsung Electronics and Komatsu

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

The idea behind Samsung Electronics Co and Komatsu 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.