Correlation Between Samsung SDI and Murata Manufacturing
Can any of the company-specific risk be diversified away by investing in both Samsung SDI and Murata Manufacturing 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 SDI and Murata Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung SDI Co and Murata Manufacturing Co, you can compare the effects of market volatilities on Samsung SDI and Murata Manufacturing 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 SDI with a short position of Murata Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung SDI and Murata Manufacturing.
Diversification Opportunities for Samsung SDI and Murata Manufacturing
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Samsung and Murata is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI Co and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing and Samsung SDI 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 SDI Co are associated (or correlated) with Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of Samsung SDI i.e., Samsung SDI and Murata Manufacturing go up and down completely randomly.
Pair Corralation between Samsung SDI and Murata Manufacturing
Assuming the 90 days trading horizon Samsung SDI Co is expected to under-perform the Murata Manufacturing. In addition to that, Samsung SDI is 1.58 times more volatile than Murata Manufacturing Co. It trades about -0.22 of its total potential returns per unit of risk. Murata Manufacturing Co is currently generating about -0.12 per unit of volatility. If you would invest 1,662 in Murata Manufacturing Co on August 28, 2024 and sell it today you would lose (95.00) from holding Murata Manufacturing Co or give up 5.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung SDI Co vs. Murata Manufacturing Co
Performance |
| Timeline |
| Samsung SDI |
| Murata Manufacturing |
Samsung SDI and Murata Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung SDI and Murata Manufacturing
The main advantage of trading using opposite Samsung SDI and Murata Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung SDI position performs unexpectedly, Murata Manufacturing 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 Murata Manufacturing will offset losses from the drop in Murata Manufacturing's long position.The idea behind Samsung SDI Co and Murata Manufacturing Co 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.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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