Correlation Between Samsung Electronics and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Samsung Electronics and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and STMicroelectronics.
Diversification Opportunities for Samsung Electronics and STMicroelectronics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Samsung and STMicroelectronics is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and STMicroelectronics go up and down completely randomly.
Pair Corralation between Samsung Electronics and STMicroelectronics
Assuming the 90 days trading horizon Samsung Electronics is expected to generate 1.81 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Samsung Electronics Co is 1.69 times less risky than STMicroelectronics. It trades about 0.24 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,876 in STMicroelectronics NV on April 23, 2025 and sell it today you would earn a total of 956.00 from holding STMicroelectronics NV or generate 50.96% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Samsung Electronics Co vs. STMicroelectronics NV
Performance |
Timeline |
Samsung Electronics |
STMicroelectronics |
Samsung Electronics and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Samsung Electronics and STMicroelectronics
The main advantage of trading using opposite Samsung Electronics and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.Samsung Electronics vs. G5 Entertainment AB | Samsung Electronics vs. Zegona Communications Plc | Samsung Electronics vs. Catalyst Media Group | Samsung Electronics vs. Cairo Communication SpA |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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