Correlation Between Microsoft and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Samsung Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Samsung Electronics Co, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Samsung Electronics.
Diversification Opportunities for Microsoft and Samsung Electronics
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Samsung is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Samsung Electronics go up and down completely randomly.
Pair Corralation between Microsoft and Samsung Electronics
Assuming the 90 days trading horizon Microsoft is expected to generate 0.67 times more return on investment than Samsung Electronics. However, Microsoft is 1.5 times less risky than Samsung Electronics. It trades about 0.05 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.05 per unit of risk. If you would invest 34,427 in Microsoft on August 24, 2024 and sell it today you would earn a total of 5,048 from holding Microsoft or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Samsung Electronics Co
Performance |
| Timeline |
| Microsoft |
| Samsung Electronics |
Microsoft and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Samsung Electronics
The main advantage of trading using opposite Microsoft and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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. JD SPORTS FASH | Samsung Electronics vs. SCIENCE IN SPORT | Samsung Electronics vs. LION ONE METALS | Samsung Electronics vs. GEELY AUTOMOBILE |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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