Correlation Between Dong A and Samsung Life

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

By analyzing existing cross correlation between Dong A Steel Technology and Samsung Life Insurance, you can compare the effects of market volatilities on Dong A and Samsung Life 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 Dong A with a short position of Samsung Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Samsung Life.

Diversification Opportunities for Dong A and Samsung Life

0.57

Correlation Coefficient

Dong A  Samsung Life

Very weak diversification

The 3 months correlation between Dong and Samsung is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Samsung Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life Insurance and Dong A 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 Dong A Steel Technology are associated (or correlated) with Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life Insurance has no effect on the direction of Dong A i.e., Dong A and Samsung Life go up and down completely randomly.

Pair Corralation between Dong A and Samsung Life

Assuming the 90 days trading horizon Dong A is expected to generate 1.49 times less return on investment than Samsung Life. In addition to that, Dong A is 1.3 times more volatile than Samsung Life Insurance. It trades about 0.03 of its total potential returns per unit of risk. Samsung Life Insurance is currently generating about 0.06 per unit of volatility. If you would invest  10,050,000  in Samsung Life Insurance on September 3, 2024 and sell it today you would earn a total of  660,000  from holding Samsung Life Insurance or generate 6.57% return on investment over 90 days.

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

Dong A Steel Technology  vs.  Samsung Life Insurance

Dong A Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung Life Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dong A and Samsung Life

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

The idea behind Dong A Steel Technology and Samsung Life Insurance 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.