Correlation Between Samsung Electronics and China Mobile

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

Diversification Opportunities for Samsung Electronics and China Mobile

-0.29

Correlation Coefficient

Samsung Electronics  China Mobile

Very good diversification

The 3 months correlation between Samsung and China is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and China Mobile go up and down completely randomly.

Pair Corralation between Samsung Electronics and China Mobile

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the China Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.23 times less risky than China Mobile. The stock trades about -0.06 of its potential returns per unit of risk. The China Life Insurance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  171.00  in China Life Insurance on October 12, 2024 and sell it today you would lose (2.00) from holding China Life Insurance or give up 1.17% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  China Life Insurance

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 latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

China Life Insurance

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Samsung Electronics and China Mobile

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

The idea behind Samsung Electronics Co and China Life Insurance 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.