Correlation Between Samsung Electronics and Hwacheon Machinery
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Hwacheon Machinery 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 Hwacheon Machinery 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 Hwacheon Machinery Co, you can compare the effects of market volatilities on Samsung Electronics and Hwacheon Machinery 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 Hwacheon Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Hwacheon Machinery.
Diversification Opportunities for Samsung Electronics and Hwacheon Machinery
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Samsung and Hwacheon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Hwacheon Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwacheon Machinery 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 Hwacheon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwacheon Machinery has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Hwacheon Machinery go up and down completely randomly.
Pair Corralation between Samsung Electronics and Hwacheon Machinery
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Hwacheon Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 3.07 times less risky than Hwacheon Machinery. The stock trades about -0.02 of its potential returns per unit of risk. The Hwacheon Machinery Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 294,500 in Hwacheon Machinery Co on September 12, 2024 and sell it today you would earn a total of 46,000 from holding Hwacheon Machinery Co or generate 15.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Hwacheon Machinery Co
Performance |
| Timeline |
| Samsung Electronics |
| Hwacheon Machinery |
Samsung Electronics and Hwacheon Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Hwacheon Machinery
The main advantage of trading using opposite Samsung Electronics and Hwacheon Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Hwacheon Machinery 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 Hwacheon Machinery will offset losses from the drop in Hwacheon Machinery's long position.| Samsung Electronics vs. LG Corp | Samsung Electronics vs. Solution Advanced Technology | Samsung Electronics vs. Busan Industrial Co | Samsung Electronics vs. Busan Ind |
| Hwacheon Machinery vs. Samsung Electronics Co | Hwacheon Machinery vs. Samsung Electronics Co | Hwacheon Machinery vs. SK Hynix | Hwacheon Machinery vs. POSCO Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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