Correlation Between Samsung Electronics and Spirent Communications

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

Diversification Opportunities for Samsung Electronics and Spirent Communications

0.4

Correlation Coefficient

Samsung Electronics  Spirent Communications

Very weak diversification

The 3 months correlation between Samsung and Spirent is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Spirent Communications go up and down completely randomly.

Pair Corralation between Samsung Electronics and Spirent Communications

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Spirent Communications. In addition to that, Samsung Electronics is 2.76 times more volatile than Spirent Communications plc. It trades about -0.2 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.03 per unit of volatility. If you would invest  17,550  in Spirent Communications plc on September 4, 2024 and sell it today you would earn a total of  230.00  from holding Spirent Communications plc or generate 1.31% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Spirent Communications plc

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Spirent Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Spirent Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Samsung Electronics and Spirent Communications

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

The idea behind Samsung Electronics Co and Spirent Communications plc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.