Correlation Between Samsung Electronics and Top Material
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Top Material 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 Top Material 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 Top Material Co, you can compare the effects of market volatilities on Samsung Electronics and Top Material 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 Top Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Top Material.
Diversification Opportunities for Samsung Electronics and Top Material
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Samsung and Top is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material 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 Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Top Material go up and down completely randomly.
Pair Corralation between Samsung Electronics and Top Material
Assuming the 90 days trading horizon Samsung Electronics is expected to generate 13.5 times less return on investment than Top Material. But when comparing it to its historical volatility, Samsung Electronics Co is 2.11 times less risky than Top Material. It trades about 0.01 of its potential returns per unit of risk. Top Material Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,750,000 in Top Material Co on October 24, 2024 and sell it today you would earn a total of 55,000 from holding Top Material Co or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Top Material Co
Performance |
| Timeline |
| Samsung Electronics |
| Top Material |
Samsung Electronics and Top Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Top Material
The main advantage of trading using opposite Samsung Electronics and Top Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Top Material 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 Top Material will offset losses from the drop in Top Material's long position.| Samsung Electronics vs. Ilji Technology Co | Samsung Electronics vs. Echomarketing CoLtd | Samsung Electronics vs. Lotte Data Communication | Samsung Electronics vs. Global Standard Technology |
| Top Material vs. Samsung Electronics Co | Top Material vs. Samsung Electronics Co | Top Material vs. LG Energy Solution | Top Material vs. SK Hynix |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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