Correlation Between Samsung Special and DSC Investment
Can any of the company-specific risk be diversified away by investing in both Samsung Special and DSC Investment 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 Special and DSC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Special Purpose and DSC Investment, you can compare the effects of market volatilities on Samsung Special and DSC Investment 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 Special with a short position of DSC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Special and DSC Investment.
Diversification Opportunities for Samsung Special and DSC Investment
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Samsung and DSC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Special Purpose and DSC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSC Investment and Samsung Special 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 Special Purpose are associated (or correlated) with DSC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSC Investment has no effect on the direction of Samsung Special i.e., Samsung Special and DSC Investment go up and down completely randomly.
Pair Corralation between Samsung Special and DSC Investment
Assuming the 90 days trading horizon Samsung Special Purpose is expected to under-perform the DSC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Special Purpose is 1.25 times less risky than DSC Investment. The stock trades about -0.03 of its potential returns per unit of risk. The DSC Investment is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 427,500 in DSC Investment on August 28, 2024 and sell it today you would lose (145,000) from holding DSC Investment or give up 33.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Special Purpose vs. DSC Investment
Performance |
| Timeline |
| Samsung Special Purpose |
| DSC Investment |
Samsung Special and DSC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Special and DSC Investment
The main advantage of trading using opposite Samsung Special and DSC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Special position performs unexpectedly, DSC Investment 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 DSC Investment will offset losses from the drop in DSC Investment's long position.The idea behind Samsung Special Purpose and DSC Investment 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.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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