Correlation Between Samsung Electronics and Volkswagen

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

Diversification Opportunities for Samsung Electronics and Volkswagen

0.48

Correlation Coefficient

Samsung Electronics  Volkswagen

Very weak diversification

The 3 months correlation between Samsung and Volkswagen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Volkswagen go up and down completely randomly.

Pair Corralation between Samsung Electronics and Volkswagen

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Volkswagen. In addition to that, Samsung Electronics is 1.85 times more volatile than Volkswagen AG. It trades about -0.04 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.04 per unit of volatility. If you would invest  9,284  in Volkswagen AG on October 11, 2024 and sell it today you would lose (362.00) from holding Volkswagen AG or give up 3.9% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  Volkswagen AG

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 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.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Samsung Electronics and Volkswagen

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

The idea behind Samsung Electronics Co and Volkswagen AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.