Correlation Between Samsung Electronics and ELECTRONIC ARTS

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

Diversification Opportunities for Samsung Electronics and ELECTRONIC ARTS

-0.62

Correlation Coefficient

Samsung Electronics  ELECTRONIC ARTS

Excellent diversification

The 3 months correlation between Samsung and ELECTRONIC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS 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 ELECTRONIC ARTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRONIC ARTS has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between Samsung Electronics and ELECTRONIC ARTS

Assuming the 90 days horizon Samsung Electronics Co is expected to under-perform the ELECTRONIC ARTS. In addition to that, Samsung Electronics is 1.79 times more volatile than ELECTRONIC ARTS. It trades about -0.16 of its total potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.16 per unit of volatility. If you would invest  13,569  in ELECTRONIC ARTS on September 3, 2024 and sell it today you would earn a total of  1,851  from holding ELECTRONIC ARTS or generate 13.64% return on investment over 90 days.

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

Samsung Electronics Co  vs.  ELECTRONIC ARTS

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ELECTRONIC ARTS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ELECTRONIC ARTS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and ELECTRONIC ARTS

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

The idea behind Samsung Electronics Co and ELECTRONIC ARTS 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.