Correlation Between Samsung Electronics and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on Samsung Electronics and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Automatic Data.
Diversification Opportunities for Samsung Electronics and Automatic Data
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Samsung and Automatic is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Automatic Data go up and down completely randomly.
Pair Corralation between Samsung Electronics and Automatic Data
Assuming the 90 days trading horizon Samsung Electronics Co is not expected to generate positive returns. Moreover, Samsung Electronics is 2.66 times more volatile than Automatic Data Processing. It trades away all of its potential returns to assume current level of volatility. Automatic Data Processing is currently generating about 0.39 per unit of risk. If you would invest 26,575 in Automatic Data Processing on August 31, 2024 and sell it today you would earn a total of 2,700 from holding Automatic Data Processing or generate 10.16% 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. Automatic Data Processing
Performance |
| Timeline |
| Samsung Electronics |
| Automatic Data Processing |
Samsung Electronics and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Automatic Data
The main advantage of trading using opposite Samsung Electronics and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Samsung Electronics vs. Samsung Electronics Co | Samsung Electronics vs. Microsoft | Samsung Electronics vs. Tencent Holdings |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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