Correlation Between Samsung Electronics and London Security
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and London Security 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 Electronics and London Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Electronics Co and London Security Plc, you can compare the effects of market volatilities on Samsung Electronics and London Security 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 Electronics with a short position of London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and London Security.
Diversification Opportunities for Samsung Electronics and London Security
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Samsung and London is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and Samsung Electronics 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 Electronics Co are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and London Security go up and down completely randomly.
Pair Corralation between Samsung Electronics and London Security
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the London Security. In addition to that, Samsung Electronics is 1.1 times more volatile than London Security Plc. It trades about -0.02 of its total potential returns per unit of risk. London Security Plc is currently generating about 0.03 per unit of volatility. If you would invest 282,151 in London Security Plc on August 31, 2024 and sell it today you would earn a total of 42,849 from holding London Security Plc or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Samsung Electronics Co vs. London Security Plc
Performance |
| Timeline |
| Samsung Electronics |
| London Security Plc |
Samsung Electronics and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and London Security
The main advantage of trading using opposite Samsung Electronics and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Samsung Electronics vs. Kaufman Et Broad | Samsung Electronics vs. Allianz Technology Trust | Samsung Electronics vs. Monster Beverage Corp | Samsung Electronics vs. Gaztransport et Technigaz |
| London Security vs. Scandinavian Tobacco Group | London Security vs. Cars Inc | London Security vs. Dalata Hotel Group | London Security vs. Ecofin Global Utilities |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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