Correlation Between Samsung Electronics and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Daewoo Engineering 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 Daewoo Engineering 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 Daewoo Engineering Construction, you can compare the effects of market volatilities on Samsung Electronics and Daewoo Engineering 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 Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Daewoo Engineering.
Diversification Opportunities for Samsung Electronics and Daewoo Engineering
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Samsung and Daewoo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering 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 Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Samsung Electronics and Daewoo Engineering
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Daewoo Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.0 times less risky than Daewoo Engineering. The stock trades about -0.07 of its potential returns per unit of risk. The Daewoo Engineering Construction is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 393,500 in Daewoo Engineering Construction on August 29, 2024 and sell it today you would lose (19,500) from holding Daewoo Engineering Construction or give up 4.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| Samsung Electronics |
| Daewoo Engineering |
Samsung Electronics and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Daewoo Engineering
The main advantage of trading using opposite Samsung Electronics and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| Samsung Electronics vs. Nice Information Telecommunication | Samsung Electronics vs. Mobile Appliance | Samsung Electronics vs. Korea Shipbuilding Offshore | Samsung Electronics vs. Daou Technology |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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