Correlation Between Samsung Electronics and US Foods

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

Diversification Opportunities for Samsung Electronics and US Foods

-0.06

Correlation Coefficient

Samsung Electronics  US Foods

Good diversification

The 3 months correlation between Samsung and UFH is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding 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 US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and US Foods go up and down completely randomly.

Pair Corralation between Samsung Electronics and US Foods

Assuming the 90 days horizon Samsung Electronics Co is expected to generate 1.59 times more return on investment than US Foods. However, Samsung Electronics is 1.59 times more volatile than US Foods Holding. It trades about 0.16 of its potential returns per unit of risk. US Foods Holding is currently generating about 0.06 per unit of risk. If you would invest  88,000  in Samsung Electronics Co on November 28, 2024 and sell it today you would earn a total of  6,400  from holding Samsung Electronics Co or generate 7.27% return on investment over 90 days.

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

Samsung Electronics Co  vs.  US Foods Holding

Samsung Electronics

Risk-Adjusted Performance

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 basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

US Foods Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Foods Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, US Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Samsung Electronics and US Foods

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

The idea behind Samsung Electronics Co and US Foods Holding 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.