Correlation Between Samsung Electronics and Shenzhen Investment

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

Diversification Opportunities for Samsung Electronics and Shenzhen Investment

0.45

Correlation Coefficient

Samsung Electronics  Shenzhen Investment

Very weak diversification

The 3 months correlation between Samsung and Shenzhen is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Shenzhen Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment 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 Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Samsung Electronics and Shenzhen Investment

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Shenzhen Investment. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 2.82 times less risky than Shenzhen Investment. The stock trades about -0.08 of its potential returns per unit of risk. The Shenzhen Investment Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Shenzhen Investment Limited on October 12, 2024 and sell it today you would earn a total of  1.00  from holding Shenzhen Investment Limited or generate 10.0% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Shenzhen Investment Limited

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.

Shenzhen Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Investment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Shenzhen Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Shenzhen Investment

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

The idea behind Samsung Electronics Co and Shenzhen Investment Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.