Correlation Between STMICROELECTRONICS and Samsung Electronics

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

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

Diversification Opportunities for STMICROELECTRONICS and Samsung Electronics

0.81

Correlation Coefficient

STMICROELECTRONICS  Samsung Electronics

Very poor diversification

The 3 months correlation between STMICROELECTRONICS and Samsung is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS i.e., STMICROELECTRONICS and Samsung Electronics go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Samsung Electronics

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 1.23 times more return on investment than Samsung Electronics. However, STMICROELECTRONICS is 1.23 times more volatile than Samsung Electronics Co. It trades about 0.29 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.14 per unit of risk. If you would invest  1,845  in STMICROELECTRONICS on April 23, 2025 and sell it today you would earn a total of  951.00  from holding STMICROELECTRONICS or generate 51.54% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  Samsung Electronics Co

STMICROELECTRONICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMICROELECTRONICS are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, STMICROELECTRONICS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Samsung Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Samsung Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and Samsung Electronics

The main advantage of trading using opposite STMICROELECTRONICS and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS 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 STMICROELECTRONICS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.