Correlation Between Samsung Electronics and Ecolab

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

Diversification Opportunities for Samsung Electronics and Ecolab

0.07

Correlation Coefficient

Samsung Electronics  Ecolab

Significant diversification

The 3 months correlation between Samsung and Ecolab is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Ecolab go up and down completely randomly.

Pair Corralation between Samsung Electronics and Ecolab

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.49 times more return on investment than Ecolab. However, Samsung Electronics is 1.49 times more volatile than Ecolab Inc. It trades about 0.04 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.03 per unit of risk. If you would invest  73,800  in Samsung Electronics Co on December 31, 2024 and sell it today you would earn a total of  3,200  from holding Samsung Electronics Co or generate 4.34% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Ecolab Inc

Samsung Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ecolab Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ecolab 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 Ecolab

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

The idea behind Samsung Electronics Co and Ecolab Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.