Correlation Between Samsung Electronics and Andrews Sykes
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Andrews Sykes 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 Andrews Sykes 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 Andrews Sykes Group, you can compare the effects of market volatilities on Samsung Electronics and Andrews Sykes 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 Andrews Sykes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Andrews Sykes.
Diversification Opportunities for Samsung Electronics and Andrews Sykes
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Samsung and Andrews is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Andrews Sykes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andrews Sykes Group 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 Andrews Sykes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andrews Sykes Group has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Andrews Sykes go up and down completely randomly.
Pair Corralation between Samsung Electronics and Andrews Sykes
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Andrews Sykes. In addition to that, Samsung Electronics is 2.47 times more volatile than Andrews Sykes Group. It trades about -0.13 of its total potential returns per unit of risk. Andrews Sykes Group is currently generating about -0.08 per unit of volatility. If you would invest 53,000 in Andrews Sykes Group on September 3, 2024 and sell it today you would lose (1,250) from holding Andrews Sykes Group or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Andrews Sykes Group
Performance |
| Timeline |
| Samsung Electronics |
| Andrews Sykes Group |
Samsung Electronics and Andrews Sykes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Andrews Sykes
The main advantage of trading using opposite Samsung Electronics and Andrews Sykes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Andrews Sykes 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 Andrews Sykes will offset losses from the drop in Andrews Sykes' long position.The idea behind Samsung Electronics Co and Andrews Sykes Group 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.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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