Correlation Between Samsung Biologics and Samsung Electronics

Can any of the company-specific risk be diversified away by investing in both Samsung Biologics and Samsung Electronics 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 Biologics and Samsung Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung Biologics Co and Samsung Electronics Co, you can compare the effects of market volatilities on Samsung Biologics and Samsung Electronics 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 Biologics with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Biologics and Samsung Electronics.

Diversification Opportunities for Samsung Biologics and Samsung Electronics

-0.07

Correlation Coefficient

Samsung Biologics  Samsung Electronics

Good diversification

The 3 months correlation between Samsung and Samsung is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Biologics Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Samsung Biologics 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 Biologics Co are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Samsung Biologics i.e., Samsung Biologics and Samsung Electronics go up and down completely randomly.

Pair Corralation between Samsung Biologics and Samsung Electronics

Assuming the 90 days trading horizon Samsung Biologics Co is expected to under-perform the Samsung Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Biologics Co is 1.38 times less risky than Samsung Electronics. The stock trades about -0.19 of its potential returns per unit of risk. The Samsung Electronics Co is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  6,800,000  in Samsung Electronics Co on January 31, 2024 and sell it today you would lose (280,000) from holding Samsung Electronics Co or give up 4.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Samsung Biologics Co  vs.  Samsung Electronics Co

Samsung Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Samsung Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Electronics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Samsung Biologics and Samsung Electronics

The main advantage of trading using opposite Samsung Biologics and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Biologics position performs unexpectedly, Samsung Electronics 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' long position.

The idea behind Samsung Biologics Co and Samsung Electronics 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.