Correlation Between Samsung Electronics and Universal Electronics

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

Diversification Opportunities for Samsung Electronics and Universal Electronics

0.15

Correlation Coefficient

Samsung Electronics  Universal Electronics

Average diversification

The 3 months correlation between Samsung and Universal is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics 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 Universal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and Universal Electronics go up and down completely randomly.

Pair Corralation between Samsung Electronics and Universal Electronics

Assuming the 90 days horizon Samsung Electronics is expected to generate 41.62 times less return on investment than Universal Electronics. But when comparing it to its historical volatility, Samsung Electronics Co is 60.74 times less risky than Universal Electronics. It trades about 0.13 of its potential returns per unit of risk. Universal Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  932.00  in Universal Electronics on August 30, 2024 and sell it today you would earn a total of  212.00  from holding Universal Electronics or generate 22.75% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Universal Electronics

Samsung Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Samsung Electronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Universal Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, Universal Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Universal Electronics

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

The idea behind Samsung Electronics Co and Universal Electronics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.