Correlation Between Samsung Electronics and American Water

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

Diversification Opportunities for Samsung Electronics and American Water

-0.74

Correlation Coefficient

Samsung Electronics  American Water

Pay attention - limited upside

The 3 months correlation between Samsung and American is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and American Water Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Water Works 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 American Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Water Works has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and American Water go up and down completely randomly.

Pair Corralation between Samsung Electronics and American Water

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 1.49 times more return on investment than American Water. However, Samsung Electronics is 1.49 times more volatile than American Water Works. It trades about 0.17 of its potential returns per unit of risk. American Water Works is currently generating about -0.05 per unit of risk. If you would invest  70,700  in Samsung Electronics Co on April 24, 2025 and sell it today you would earn a total of  15,300  from holding Samsung Electronics Co or generate 21.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Samsung Electronics Co  vs.  American Water Works

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 13 (%) 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.

American Water Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Water Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Water is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Samsung Electronics and American Water

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

The idea behind Samsung Electronics Co and American Water Works 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.