Correlation Between Samsung Electronics and Semiconductor Manufacturing

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

Diversification Opportunities for Samsung Electronics and Semiconductor Manufacturing

-0.32

Correlation Coefficient

Samsung Electronics  Semiconductor Manufacturing

Very good diversification

The 3 months correlation between Samsung and Semiconductor is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Semiconductor Manufacturing In in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Manufacturing 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 Semiconductor Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Manufacturing has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Semiconductor Manufacturing go up and down completely randomly.

Pair Corralation between Samsung Electronics and Semiconductor Manufacturing

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Semiconductor Manufacturing. In addition to that, Samsung Electronics is 3.32 times more volatile than Semiconductor Manufacturing International. It trades about -0.08 of its total potential returns per unit of risk. Semiconductor Manufacturing International is currently generating about 0.11 per unit of volatility. If you would invest  326.00  in Semiconductor Manufacturing International on October 24, 2024 and sell it today you would earn a total of  14.00  from holding Semiconductor Manufacturing International or generate 4.29% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Semiconductor Manufacturing In

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. In spite of latest uncertain 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.

Semiconductor Manufacturing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Semiconductor Manufacturing 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 Semiconductor Manufacturing

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

The idea behind Samsung Electronics Co and Semiconductor Manufacturing International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.