Correlation Between Samsung Electronics and LG Chem
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and LG Chem 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 LG Chem 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 LG Chem, you can compare the effects of market volatilities on Samsung Electronics and LG Chem 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 LG Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and LG Chem.
Diversification Opportunities for Samsung Electronics and LG Chem
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Samsung and 051915 is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and LG Chem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chem 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 LG Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chem has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and LG Chem go up and down completely randomly.
Pair Corralation between Samsung Electronics and LG Chem
Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 0.78 times more return on investment than LG Chem. However, Samsung Electronics Co is 1.29 times less risky than LG Chem. It trades about -0.03 of its potential returns per unit of risk. LG Chem is currently generating about -0.07 per unit of risk. If you would invest 6,937,791 in Samsung Electronics Co on August 25, 2024 and sell it today you would lose (1,337,791) from holding Samsung Electronics Co or give up 19.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. LG Chem
Performance |
| Timeline |
| Samsung Electronics |
| LG Chem |
Samsung Electronics and LG Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and LG Chem
The main advantage of trading using opposite Samsung Electronics and LG Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, LG Chem 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 LG Chem will offset losses from the drop in LG Chem's long position.| Samsung Electronics vs. Haesung Industrial Co | Samsung Electronics vs. Taeyang Metal Industrial | Samsung Electronics vs. Hanjin Transportation Co | Samsung Electronics vs. GS Retail Co |
| LG Chem vs. E Investment Development | LG Chem vs. Dongbang Transport Logistics | LG Chem vs. Heungkuk Metaltech CoLtd | LG Chem vs. Choil Aluminum |
Check out your portfolio center.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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