Correlation Between Samsung Electronics and SFA Semicon

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

Diversification Opportunities for Samsung Electronics and SFA Semicon

0.67

Correlation Coefficient

Samsung Electronics  SFA Semicon

Poor diversification

The 3 months correlation between Samsung and SFA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and SFA Semicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Semicon 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 SFA Semicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Semicon has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and SFA Semicon go up and down completely randomly.

Pair Corralation between Samsung Electronics and SFA Semicon

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 0.86 times more return on investment than SFA Semicon. However, Samsung Electronics Co is 1.16 times less risky than SFA Semicon. It trades about -0.1 of its potential returns per unit of risk. SFA Semicon Co is currently generating about -0.09 per unit of risk. If you would invest  5,214,575  in Samsung Electronics Co on September 13, 2024 and sell it today you would lose (664,575) from holding Samsung Electronics Co or give up 12.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Samsung Electronics Co  vs.  SFA Semicon Co

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.

SFA Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Semicon 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.

Pair Trading with Samsung Electronics and SFA Semicon

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

The idea behind Samsung Electronics Co and SFA Semicon 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.