Correlation Between Samsung Electronics and SPDR Gold

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

Diversification Opportunities for Samsung Electronics and SPDR Gold

0.15

Correlation Coefficient

Samsung Electronics  SPDR Gold

Average diversification

The 3 months correlation between Samsung and SPDR is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares 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 SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and SPDR Gold go up and down completely randomly.

Pair Corralation between Samsung Electronics and SPDR Gold

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the SPDR Gold. In addition to that, Samsung Electronics is 2.3 times more volatile than SPDR Gold Shares. It trades about -0.05 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.14 per unit of volatility. If you would invest  17,379  in SPDR Gold Shares on October 10, 2024 and sell it today you would earn a total of  6,413  from holding SPDR Gold Shares or generate 36.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Samsung Electronics Co  vs.  SPDR Gold Shares

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. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR Gold Shares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR Gold is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Samsung Electronics and SPDR Gold

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

The idea behind Samsung Electronics Co and SPDR Gold Shares 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.