Correlation Between Samsung SDI and Standard Lithium

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

Diversification Opportunities for Samsung SDI and Standard Lithium

-0.05

Correlation Coefficient

Samsung SDI  Standard Lithium

Good diversification

The 3 months correlation between Samsung and Standard is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI Co and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Samsung SDI i.e., Samsung SDI and Standard Lithium go up and down completely randomly.

Pair Corralation between Samsung SDI and Standard Lithium

Assuming the 90 days trading horizon Samsung SDI Co is expected to generate 0.97 times more return on investment than Standard Lithium. However, Samsung SDI Co is 1.04 times less risky than Standard Lithium. It trades about -0.08 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.18 per unit of risk. If you would invest  4,410  in Samsung SDI Co on September 18, 2024 and sell it today you would lose (220.00) from holding Samsung SDI Co or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Samsung SDI Co  vs.  Standard 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.

Standard Lithium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Lithium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Standard Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung SDI and Standard Lithium

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

The idea behind Samsung SDI Co and Standard 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.