Correlation Between Samsung Electronics and Samsung Fire
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Samsung Fire 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 Samsung Fire 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 Samsung Fire Marine, you can compare the effects of market volatilities on Samsung Electronics and Samsung Fire 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 Samsung Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Samsung Fire.
Diversification Opportunities for Samsung Electronics and Samsung Fire
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Samsung and Samsung is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Samsung Fire Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Fire Marine 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 Samsung Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Fire Marine has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Samsung Fire go up and down completely randomly.
Pair Corralation between Samsung Electronics and Samsung Fire
Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 0.88 times more return on investment than Samsung Fire. However, Samsung Electronics Co is 1.13 times less risky than Samsung Fire. It trades about -0.06 of its potential returns per unit of risk. Samsung Fire Marine is currently generating about -0.23 per unit of risk. If you would invest 4,495,000 in Samsung Electronics Co on October 25, 2024 and sell it today you would lose (75,000) from holding Samsung Electronics Co or give up 1.67% 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. Samsung Fire Marine
Performance |
| Timeline |
| Samsung Electronics |
| Samsung Fire Marine |
Samsung Electronics and Samsung Fire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Samsung Fire
The main advantage of trading using opposite Samsung Electronics and Samsung Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Samsung Fire 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 Samsung Fire will offset losses from the drop in Samsung Fire's long position.The idea behind Samsung Electronics Co and Samsung Fire Marine 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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