Correlation Between Samsung Electronics and LG Uplus

Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and LG Uplus 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 LG Uplus 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 LG Uplus, you can compare the effects of market volatilities on Samsung Electronics and LG Uplus 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 LG Uplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and LG Uplus.

Diversification Opportunities for Samsung Electronics and LG Uplus

-0.34

Correlation Coefficient

Samsung Electronics  LG Uplus

Very good diversification

The 3 months correlation between Samsung and 032640 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and LG Uplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Uplus 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 LG Uplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Uplus has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and LG Uplus go up and down completely randomly.

Pair Corralation between Samsung Electronics and LG Uplus

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the LG Uplus. In addition to that, Samsung Electronics is 1.88 times more volatile than LG Uplus. It trades about -0.18 of its total potential returns per unit of risk. LG Uplus is currently generating about 0.24 per unit of volatility. If you would invest  984,000  in LG Uplus on September 2, 2024 and sell it today you would earn a total of  175,000  from holding LG Uplus or generate 17.78% return on investment over 90 days.

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

Samsung Electronics Co  vs.  LG Uplus

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LG Uplus

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LG Uplus are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LG Uplus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and LG Uplus

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

The idea behind Samsung Electronics Co and LG Uplus 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.