Correlation Between Finebesteel and Samsung Electronics

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

By analyzing existing cross correlation between Finebesteel and Samsung Electronics Co, you can compare the effects of market volatilities on Finebesteel and Samsung 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 Finebesteel with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finebesteel and Samsung Electronics.

Diversification Opportunities for Finebesteel and Samsung Electronics

0.52

Correlation Coefficient

Finebesteel  Samsung Electronics

Very weak diversification

The 3 months correlation between Finebesteel and Samsung is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Finebesteel 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 Finebesteel are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Finebesteel i.e., Finebesteel and Samsung Electronics go up and down completely randomly.

Pair Corralation between Finebesteel and Samsung Electronics

Assuming the 90 days trading horizon Finebesteel is expected to under-perform the Samsung Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Finebesteel is 1.16 times less risky than Samsung Electronics. The stock trades about -0.15 of its potential returns per unit of risk. The Samsung Electronics Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,260,000  in Samsung Electronics Co on March 28, 2024 and sell it today you would earn a total of  180,000  from holding Samsung Electronics Co or generate 2.88% return on investment over 90 days.

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

Finebesteel  vs.  Samsung Electronics Co

Finebesteel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finebesteel 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 July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 somewhat strong basic indicators, Samsung Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finebesteel and Samsung Electronics

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

The idea behind Finebesteel and Samsung Electronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.