Correlation Between Samsung Electronics and KB Home
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and KB Home 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 KB Home 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 KB Home, you can compare the effects of market volatilities on Samsung Electronics and KB Home 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 KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and KB Home.
Diversification Opportunities for Samsung Electronics and KB Home
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Samsung and KBH is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home 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 KB Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Home has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and KB Home go up and down completely randomly.
Pair Corralation between Samsung Electronics and KB Home
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the KB Home. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.05 times less risky than KB Home. The stock trades about -0.01 of its potential returns per unit of risk. The KB Home is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 92,279 in KB Home on August 26, 2024 and sell it today you would earn a total of 64,421 from holding KB Home or generate 69.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. KB Home
Performance |
| Timeline |
| Samsung Electronics |
| KB Home |
Samsung Electronics and KB Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and KB Home
The main advantage of trading using opposite Samsung Electronics and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, KB Home 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 KB Home will offset losses from the drop in KB Home's long position.| Samsung Electronics vs. Monster Beverage Corp | Samsung Electronics vs. DXC Technology | Samsung Electronics vs. Deutsche Bank Aktiengesellschaft | Samsung Electronics vs. Cognizant Technology Solutions |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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