Correlation Between Samsung Electronics and Apple

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

Diversification Opportunities for Samsung Electronics and Apple

0.3

Correlation Coefficient

Samsung Electronics  Apple

Weak diversification

The 3 months correlation between Samsung and Apple is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Apple go up and down completely randomly.

Pair Corralation between Samsung Electronics and Apple

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.55 times more return on investment than Apple. However, Samsung Electronics is 1.55 times more volatile than Apple Inc. It trades about 0.23 of its potential returns per unit of risk. Apple Inc is currently generating about 0.03 per unit of risk. If you would invest  71,400  in Samsung Electronics Co on November 29, 2024 and sell it today you would earn a total of  7,200  from holding Samsung Electronics Co or generate 10.08% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Apple Inc

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Apple Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Samsung Electronics and Apple

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

The idea behind Samsung Electronics Co and Apple 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.