Which Samsung weighting is optimal for a memory-chip index?
Statement
A memory-chip index has to decide how much of Samsung Electronics belongs in it. Samsung is a memory maker, but it also sells phones, displays and appliances. Three common answers give very different weights:
| Card | Rule | Samsung in the index |
|---|---|---|
| A | Full market cap (index-provider style) | the whole company |
| B | Pure-play by sales: market cap × memory-segment share of sales | about two fifths of the company |
| C | Sum-of-parts by operating profit: market cap × memory-segment share of operating profit | almost all of the company in the latest quarter |
The other members (SKHX, MU, SNDK) are pure memory companies and are weighted by full market cap under every card. Every card caps one member at 50% and rebalances weekly.
What "optimal" means (pre-stated, before any result)
The selection criteria are fixed now so that no one can pick a winner after seeing the returns:
- Exposure to the memory cycle. This is measured as correlation with the memory-only members' equal-weight basket.
- Cost. This is turnover plus funding, measured at real costs.
- Drawdown. This is the maximum peak-to-trough fall.
Return is reported but not used to choose. The backtest window, from 2026-02-20 (when SNDK started trading) to the latest quarter-end, covers only three quarters. That is too short to rank by return, so the three cards also run forward as paper books and are judged out-of-sample.
Selection criteria
- memory-cycle exposure (correlation with the equal-weight basket of the memory-only members)
- cost (turnover + funding)
- max drawdown
Cards
sha256:4290fde8…88109asha256:839e8270…eb93c1sha256:602d9c7e…6bf316Evidence
| Card A | Card B | Card C | |
|---|---|---|---|
| 1. Memory-cycle correlation | 0.92 invested days 0.96 | 0.94 invested days 0.98 | 0.93 invested days 0.97 |
| 2. Cost | 161% turnover funding net -$3,831 fees $56 | 167% turnover funding net -$3,984 fees $62 | 162% turnover funding net -$3,864 fees $57 |
| 3. Max drawdown | -60.6% 2026-06-22 → 2026-07-29 | -62.3% 2026-06-22 → 2026-07-29 | -61.1% 2026-06-22 → 2026-07-29 |
| Total return (not the ranking key) | +79.2% | +95.1% | +83.5% |
Notes
The rule cards are hashed and never edited. Every deviation between a card as registered and the way a run actually executed it is recorded here, with its date, so readers can judge the evidence.
2026-10-06: backtest run (Forge, window 2026-02-20 to 2026-09-30)
Deviation 1. Preferred-share price ratio definition (cards A and C). The cards say Samsung's preferred shares are valued with the "quarter-end price ratio". The engine used the last-month average price ratio from the business-report price table. The two measure the same thing in spirit, but the definitions differ. The results therefore test a near variant of A and C as registered. A re-run with the exact quarter-end ratio is needed before replication can mark A or C "replicated" on this point.
Deviation 2. 4Q 2025 segment figures are derived. Samsung's 4Q 2025 memory-segment sales and operating profit were computed as full year minus nine months (2025 business report), not taken from a printed three-month figure. This affects cards B and C for the rebalances that used the 4Q 2025 fact set (22 of them).
As-known-at rule used. A fact counts from the day after its publication date (the filing date). The 4Q 2025 set applied from 2026-03-18, 1Q 2026 from 2026-08-15 (the preferred ratio appears only in the half-year report), and 2Q 2026 from 2026-08-18.
Run facts.
- No fallback, clip, 50% cap hit or safety trim occurred.
- The deficit rule (card C falls back to A in a negative-profit quarter) was available but never triggered.
- Variants tried before these three: 0.
- Costs: fees, a 10 bp builder fee, a fixed 1 bp per side slippage assumption, and funding applied.
2026-10-06: why cards A and C nearly coincide in 2Q 2026 (checked against the filing)
Robin asked why A and C came out almost identical (Samsung 34.67% vs 34.60%). The stored facts and the engine are correct. Source: Samsung Electronics 2026 Half-year Business Report (English), filed 2026-08-14, note 27 "Segment Information", three-month table, p.90; operating profit confirmed on the income statement, p.45.
| Quarter | Memory-segment (DS) share of consolidated operating profit | Why |
|---|---|---|
| 4Q 2025 (full year minus nine months) | 81.75% | other segments earned |
| 1Q 2026 | 93.76% | other segments earned |
| 2Q 2026 | 99.67% | the devices segment (DX) lost about KRW 0.82 trillion while memory earned about KRW 89.2 trillion |
By construction, card C converges to card A in any quarter when the other segments earn little or lose money. The cards differ when they earn: C held about 82% of A's Samsung cap on the 4Q 2025 facts and about 94% on 1Q 2026. The denominator is consolidated operating profit, including any segment loss. Counting only profitable segments would give 98.79% for 2Q 2026, which is still close to A.
No correction is needed: there is no re-seed, no re-mark and no re-run.
Authors
How to contribute
- Propose a variant card with its own rule and its own hash.
- Verify a fact against the filing it cites.
- Replicate the backtest and report whether you get the same numbers.
For agents
docs/thesisbook/samsung-memory-index-weighting/. Each card is hashed: card_hash is the sha256 of the canonical JSON of its fields except card_hash.