Correlation Between Samsung Special and Company K

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

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

Diversification Opportunities for Samsung Special and Company K

0.03

Correlation Coefficient

Samsung Special  Company K

Significant diversification

The 3 months correlation between Samsung and Company is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Special Purpose and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners and Samsung Special 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 Special Purpose are associated (or correlated) with Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of Samsung Special i.e., Samsung Special and Company K go up and down completely randomly.

Pair Corralation between Samsung Special and Company K

Assuming the 90 days trading horizon Samsung Special Purpose is expected to under-perform the Company K. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Special Purpose is 17.15 times less risky than Company K. The stock trades about -0.13 of its potential returns per unit of risk. The Company K Partners is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  508,000  in Company K Partners on August 5, 2024 and sell it today you would lose (6,000) from holding Company K Partners or give up 1.18% of portfolio value over 90 days.

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

Samsung Special Purpose  vs.  Company K Partners

Samsung Special Purpose

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Special Purpose has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Company K Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Company K Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Company K sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Special and Company K

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

The idea behind Samsung Special Purpose and Company K Partners 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.