Correlation Between Samsung Electronics and Xiaomi

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

Diversification Opportunities for Samsung Electronics and Xiaomi

0.19

Correlation Coefficient

Samsung Electronics  Xiaomi

Average diversification

The 3 months correlation between Samsung and Xiaomi is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Xiaomi go up and down completely randomly.

Pair Corralation between Samsung Electronics and Xiaomi

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 7.53 times less return on investment than Xiaomi. But when comparing it to its historical volatility, Samsung Electronics Co is 1.84 times less risky than Xiaomi. It trades about 0.04 of its potential returns per unit of risk. Xiaomi is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  425.00  in Xiaomi on December 30, 2024 and sell it today you would earn a total of  162.00  from holding Xiaomi or generate 38.12% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Xiaomi

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

Xiaomi

Risk-Adjusted Performance

Good

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

Pair Trading with Samsung Electronics and Xiaomi

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

The idea behind Samsung Electronics Co and Xiaomi 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.