Correlation Between Samsung Electronics and Wooyang

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

Diversification Opportunities for Samsung Electronics and Wooyang

0.78

Correlation Coefficient

Samsung Electronics  Wooyang

Poor diversification

The 3 months correlation between Samsung and Wooyang is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Wooyang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wooyang 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 Wooyang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wooyang has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Wooyang go up and down completely randomly.

Pair Corralation between Samsung Electronics and Wooyang

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Wooyang. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 3.13 times less risky than Wooyang. The stock trades about -0.2 of its potential returns per unit of risk. The Wooyang Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  321,500  in Wooyang Co on September 27, 2024 and sell it today you would earn a total of  85,000  from holding Wooyang Co or generate 26.44% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Wooyang 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.

Wooyang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wooyang Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wooyang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Samsung Electronics and Wooyang

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

The idea behind Samsung Electronics Co and Wooyang 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.