Correlation Between Samsung Electronics and HK Electric

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

Diversification Opportunities for Samsung Electronics and HK Electric

-0.79

Correlation Coefficient

Samsung Electronics  HK Electric

Pay attention - limited upside

The 3 months correlation between Samsung and HKT is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments 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 HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and HK Electric go up and down completely randomly.

Pair Corralation between Samsung Electronics and HK Electric

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the HK Electric. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.12 times less risky than HK Electric. The stock trades about -0.09 of its potential returns per unit of risk. The HK Electric Investments is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  41.00  in HK Electric Investments on October 9, 2024 and sell it today you would earn a total of  24.00  from holding HK Electric Investments or generate 58.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Samsung Electronics Co  vs.  HK Electric Investments

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 conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

HK Electric Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Samsung Electronics and HK Electric

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

The idea behind Samsung Electronics Co and HK Electric Investments 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.