Correlation Between Samsung Electronics and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Nam Hwa 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 Nam Hwa 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 Nam Hwa Construction, you can compare the effects of market volatilities on Samsung Electronics and Nam Hwa 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 Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Nam Hwa.
Diversification Opportunities for Samsung Electronics and Nam Hwa
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Samsung and Nam is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction 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 Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Nam Hwa go up and down completely randomly.
Pair Corralation between Samsung Electronics and Nam Hwa
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Nam Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.3 times less risky than Nam Hwa. The stock trades about -0.16 of its potential returns per unit of risk. The Nam Hwa Construction is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 411,000 in Nam Hwa Construction on August 29, 2024 and sell it today you would lose (1,500) from holding Nam Hwa Construction or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Nam Hwa Construction
Performance |
| Timeline |
| Samsung Electronics |
| Nam Hwa Construction |
Samsung Electronics and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Nam Hwa
The main advantage of trading using opposite Samsung Electronics and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| Samsung Electronics vs. Chin Yang Chemical | Samsung Electronics vs. Dongbang Transport Logistics | Samsung Electronics vs. Shinhan Inverse Silver | Samsung Electronics vs. JC Chemical Co |
| Nam Hwa vs. Samsung Electronics Co | Nam Hwa vs. Samsung Electronics Co | Nam Hwa vs. KB Financial Group | Nam Hwa vs. Shinhan Financial Group |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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