Correlation Between Samsung Electronics and Goodwin PLC
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Goodwin PLC 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 Goodwin PLC 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 Goodwin PLC, you can compare the effects of market volatilities on Samsung Electronics and Goodwin PLC 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 Goodwin PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Goodwin PLC.
Diversification Opportunities for Samsung Electronics and Goodwin PLC
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Samsung and Goodwin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Goodwin PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodwin 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 Goodwin PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodwin PLC has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Goodwin PLC go up and down completely randomly.
Pair Corralation between Samsung Electronics and Goodwin PLC
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Goodwin PLC. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.3 times less risky than Goodwin PLC. The stock trades about -0.01 of its potential returns per unit of risk. The Goodwin PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 300,119 in Goodwin PLC on September 3, 2024 and sell it today you would earn a total of 385,881 from holding Goodwin PLC or generate 128.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Goodwin PLC
Performance |
| Timeline |
| Samsung Electronics |
| Goodwin PLC |
Samsung Electronics and Goodwin PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Goodwin PLC
The main advantage of trading using opposite Samsung Electronics and Goodwin PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Goodwin PLC 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 Goodwin PLC will offset losses from the drop in Goodwin PLC's long position.The idea behind Samsung Electronics Co and Goodwin PLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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