Correlation Between Samsung SDI and Union Materials
Can any of the company-specific risk be diversified away by investing in both Samsung SDI and Union Materials 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 SDI and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung SDI and Union Materials Corp, you can compare the effects of market volatilities on Samsung SDI and Union Materials 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 SDI with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung SDI and Union Materials.
Diversification Opportunities for Samsung SDI and Union Materials
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Samsung and Union is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and Samsung SDI 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 SDI are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Samsung SDI i.e., Samsung SDI and Union Materials go up and down completely randomly.
Pair Corralation between Samsung SDI and Union Materials
Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the Union Materials. In addition to that, Samsung SDI is 1.1 times more volatile than Union Materials Corp. It trades about -0.21 of its total potential returns per unit of risk. Union Materials Corp is currently generating about -0.03 per unit of volatility. If you would invest 242,000 in Union Materials Corp on August 25, 2024 and sell it today you would lose (9,500) from holding Union Materials Corp or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung SDI vs. Union Materials Corp
Performance |
| Timeline |
| Samsung SDI |
| Union Materials Corp |
Samsung SDI and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung SDI and Union Materials
The main advantage of trading using opposite Samsung SDI and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung SDI position performs unexpectedly, Union Materials 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 Union Materials will offset losses from the drop in Union Materials' long position.| Samsung SDI vs. Dongwoo Farm To | Samsung SDI vs. Daishin Information Communications | Samsung SDI vs. Dongbang Ship Machinery | Samsung SDI vs. Nam Hwa Construction |
| Union Materials vs. SK Chemicals Co | Union Materials vs. Kukdong Oil Chemicals | Union Materials vs. Choil Aluminum | Union Materials vs. Homecast CoLtd |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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