Correlation Between Samsung Electronics and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and EAGLE 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 EAGLE 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 EAGLE MATERIALS, you can compare the effects of market volatilities on Samsung Electronics and EAGLE 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 EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and EAGLE MATERIALS.
Diversification Opportunities for Samsung Electronics and EAGLE MATERIALS
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Samsung and EAGLE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between Samsung Electronics and EAGLE MATERIALS
Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.64 times more return on investment than EAGLE MATERIALS. However, Samsung Electronics is 1.64 times more volatile than EAGLE MATERIALS. It trades about -0.05 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.18 per unit of risk. If you would invest 79,000 in Samsung Electronics Co on November 7, 2024 and sell it today you would lose (6,400) from holding Samsung Electronics Co or give up 8.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. EAGLE MATERIALS
Performance |
| Timeline |
| Samsung Electronics |
| EAGLE MATERIALS |
Samsung Electronics and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and EAGLE MATERIALS
The main advantage of trading using opposite Samsung Electronics and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, EAGLE 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 EAGLE MATERIALS will offset losses from the drop in EAGLE MATERIALS'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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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