Correlation Between Samsung Electronics and Charter Communications

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

Diversification Opportunities for Samsung Electronics and Charter Communications

0.17

Correlation Coefficient

Samsung Electronics  Charter Communications

Average diversification

The 3 months correlation between Samsung and Charter is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Charter Communications go up and down completely randomly.

Pair Corralation between Samsung Electronics and Charter Communications

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.06 times more return on investment than Charter Communications. However, Samsung Electronics is 1.06 times more volatile than Charter Communications. It trades about -0.04 of its potential returns per unit of risk. Charter Communications is currently generating about -0.06 per unit of risk. If you would invest  77,000  in Samsung Electronics Co on December 4, 2024 and sell it today you would lose (4,600) from holding Samsung Electronics Co or give up 5.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Samsung Electronics Co  vs.  Charter Communications

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.

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Samsung Electronics and Charter Communications

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

The idea behind Samsung Electronics Co and Charter Communications 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.