Correlation Between Samsung Electronics and Ecolab

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

Diversification Opportunities for Samsung Electronics and Ecolab

0.4

Correlation Coefficient

Samsung Electronics  Ecolab

Very weak diversification

The 3 months correlation between Samsung and Ecolab is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Ecolab go up and down completely randomly.

Pair Corralation between Samsung Electronics and Ecolab

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 2.95 times less return on investment than Ecolab. In addition to that, Samsung Electronics is 1.46 times more volatile than Ecolab Inc. It trades about 0.03 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.13 per unit of volatility. If you would invest  23,276  in Ecolab Inc on November 29, 2024 and sell it today you would earn a total of  2,244  from holding Ecolab Inc or generate 9.64% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Ecolab Inc

Samsung Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ecolab Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ecolab may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Samsung Electronics and Ecolab

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

The idea behind Samsung Electronics Co and Ecolab Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.