Correlation Between Samsung SDI and Rock Tech

Can any of the company-specific risk be diversified away by investing in both Samsung SDI and Rock Tech 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 SDI and Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung SDI Co and Rock Tech Lithium, you can compare the effects of market volatilities on Samsung SDI and Rock Tech 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 SDI with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung SDI and Rock Tech.

Diversification Opportunities for Samsung SDI and Rock Tech

0.71

Correlation Coefficient

Samsung SDI  Rock Tech

Poor diversification

The 3 months correlation between Samsung and Rock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI Co and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and Samsung SDI 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 SDI Co are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Samsung SDI i.e., Samsung SDI and Rock Tech go up and down completely randomly.

Pair Corralation between Samsung SDI and Rock Tech

Assuming the 90 days trading horizon Samsung SDI Co is expected to under-perform the Rock Tech. But the stock apears to be less risky and, when comparing its historical volatility, Samsung SDI Co is 1.64 times less risky than Rock Tech. The stock trades about -0.21 of its potential returns per unit of risk. The Rock Tech Lithium is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Rock Tech Lithium on September 18, 2024 and sell it today you would lose (26.00) from holding Rock Tech Lithium or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Samsung SDI Co  vs.  Rock Tech Lithium

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Samsung SDI and Rock Tech

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

The idea behind Samsung SDI Co and Rock Tech Lithium 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.