Correlation Between Samsung Electronics and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and WPP 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 WPP 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 WPP PLC ADR, you can compare the effects of market volatilities on Samsung Electronics and WPP 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 WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and WPP PLC.
Diversification Opportunities for Samsung Electronics and WPP PLC
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Samsung and WPP is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR 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 WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and WPP PLC go up and down completely randomly.
Pair Corralation between Samsung Electronics and WPP PLC
Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.65 times less return on investment than WPP PLC. In addition to that, Samsung Electronics is 2.05 times more volatile than WPP PLC ADR. It trades about 0.02 of its total potential returns per unit of risk. WPP PLC ADR is currently generating about 0.07 per unit of volatility. If you would invest 4,940 in WPP PLC ADR on August 30, 2024 and sell it today you would earn a total of 110.00 from holding WPP PLC ADR or generate 2.23% 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. WPP PLC ADR
Performance |
| Timeline |
| Samsung Electronics |
| WPP PLC ADR |
Samsung Electronics and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and WPP PLC
The main advantage of trading using opposite Samsung Electronics and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, WPP 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 WPP PLC will offset losses from the drop in WPP PLC's long position.The idea behind Samsung Electronics Co and WPP PLC ADR 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.| WPP PLC vs. Scandinavian Tobacco Group | WPP PLC vs. MELIA HOTELS | WPP PLC vs. KB HOME | WPP PLC vs. CENTURIA OFFICE REIT |
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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