Correlation Between Daewoo Engineering and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both Daewoo Engineering and Samsung Electronics 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 Daewoo Engineering and Samsung Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewoo Engineering Construction and Samsung Electronics Co, you can compare the effects of market volatilities on Daewoo Engineering and Samsung Electronics 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 Daewoo Engineering with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Engineering and Samsung Electronics.
Diversification Opportunities for Daewoo Engineering and Samsung Electronics
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daewoo and Samsung is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Engineering Constructio and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Daewoo Engineering 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 Daewoo Engineering Construction are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Daewoo Engineering i.e., Daewoo Engineering and Samsung Electronics go up and down completely randomly.
Pair Corralation between Daewoo Engineering and Samsung Electronics
Assuming the 90 days trading horizon Daewoo Engineering Construction is expected to generate 1.0 times more return on investment than Samsung Electronics. However, Daewoo Engineering Construction is 1.0 times less risky than Samsung Electronics. It trades about -0.01 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.04 per unit of risk. If you would invest 396,500 in Daewoo Engineering Construction on August 29, 2024 and sell it today you would lose (22,000) from holding Daewoo Engineering Construction or give up 5.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewoo Engineering Constructio vs. Samsung Electronics Co
Performance |
| Timeline |
| Daewoo Engineering |
| Samsung Electronics |
Daewoo Engineering and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo Engineering and Samsung Electronics
The main advantage of trading using opposite Daewoo Engineering and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo Engineering position performs unexpectedly, Samsung Electronics 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 Electronics will offset losses from the drop in Samsung Electronics' long position.| Daewoo Engineering vs. Samsung Electronics Co | Daewoo Engineering vs. Samsung Electronics Co | Daewoo Engineering vs. KB Financial Group | Daewoo Engineering vs. Shinhan Financial Group |
| Samsung Electronics vs. Nice Information Telecommunication | Samsung Electronics vs. Mobile Appliance | Samsung Electronics vs. Korea Shipbuilding Offshore | Samsung Electronics vs. Daou Technology |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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