Correlation Between BHI and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both BHI 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 BHI and Samsung Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and Samsung Electronics Co, you can compare the effects of market volatilities on BHI 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 BHI with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and Samsung Electronics.
Diversification Opportunities for BHI and Samsung Electronics
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BHI and Samsung is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and BHI 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 BHI Co 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 BHI i.e., BHI and Samsung Electronics go up and down completely randomly.
Pair Corralation between BHI and Samsung Electronics
Assuming the 90 days trading horizon BHI Co is expected to generate 2.63 times more return on investment than Samsung Electronics. However, BHI is 2.63 times more volatile than Samsung Electronics Co. It trades about 0.23 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 1,525,000 in BHI Co on October 20, 2024 and sell it today you would earn a total of 283,000 from holding BHI Co or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. Samsung Electronics Co
Performance |
| Timeline |
| BHI Co |
| Samsung Electronics |
BHI and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and Samsung Electronics
The main advantage of trading using opposite BHI and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI 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.The idea behind BHI Co and Samsung Electronics Co 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.| Samsung Electronics vs. Air Busan Co | Samsung Electronics vs. Cloud Air CoLtd | Samsung Electronics vs. EBEST Investment Securities | Samsung Electronics vs. Korea Investment 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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