Correlation Between Samsung Electronics and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on Samsung Electronics and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Applied Materials.
Diversification Opportunities for Samsung Electronics and Applied Materials
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Samsung and Applied is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Applied Materials go up and down completely randomly.
Pair Corralation between Samsung Electronics and Applied Materials
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.36 times less risky than Applied Materials. The stock trades about -0.18 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 363,116 in Applied Materials on November 2, 2024 and sell it today you would earn a total of 9,384 from holding Applied Materials or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Applied Materials
Performance |
| Timeline |
| Samsung Electronics |
| Applied Materials |
Samsung Electronics and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Applied Materials
The main advantage of trading using opposite Samsung Electronics and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Samsung Electronics vs. KB Home | Samsung Electronics vs. First Majestic Silver | Samsung Electronics vs. Desarrolladora Homex SAB | Samsung Electronics vs. Verizon Communications |
| Applied Materials vs. Southwest Airlines | Applied Materials vs. Deutsche Bank Aktiengesellschaft | Applied Materials vs. Capital One Financial | Applied Materials vs. DXC Technology |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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