Correlation Between Samsung Electronics and CHINA HUARONG

Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and CHINA HUARONG 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 CHINA HUARONG 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 CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Samsung Electronics and CHINA HUARONG 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 CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and CHINA HUARONG.

Diversification Opportunities for Samsung Electronics and CHINA HUARONG

-0.42

Correlation Coefficient

Samsung Electronics  CHINA HUARONG

Very good diversification

The 3 months correlation between Samsung and CHINA is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD 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 CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and CHINA HUARONG go up and down completely randomly.

Pair Corralation between Samsung Electronics and CHINA HUARONG

Assuming the 90 days horizon Samsung Electronics Co is expected to generate 0.13 times more return on investment than CHINA HUARONG. However, Samsung Electronics Co is 7.88 times less risky than CHINA HUARONG. It trades about -0.06 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about -0.03 per unit of risk. If you would invest  95,200  in Samsung Electronics Co on September 17, 2024 and sell it today you would lose (2,400) from holding Samsung Electronics Co or give up 2.52% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  CHINA HUARONG ENERHD 50

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.

CHINA HUARONG ENERHD

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and CHINA HUARONG

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

The idea behind Samsung Electronics Co and CHINA HUARONG ENERHD 50 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.