Correlation Between SK Hynix and ADM Korea
Can any of the company-specific risk be diversified away by investing in both SK Hynix and ADM Korea 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 SK Hynix and ADM Korea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Hynix and ADM Korea, you can compare the effects of market volatilities on SK Hynix and ADM Korea 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 SK Hynix with a short position of ADM Korea. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and ADM Korea.
Diversification Opportunities for SK Hynix and ADM Korea
Very weak diversification
The 3 months correlation between 000660 and ADM is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and ADM Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADM Korea and SK Hynix 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 SK Hynix are associated (or correlated) with ADM Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADM Korea has no effect on the direction of SK Hynix i.e., SK Hynix and ADM Korea go up and down completely randomly.
Pair Corralation between SK Hynix and ADM Korea
Assuming the 90 days trading horizon SK Hynix is expected to generate 1.07 times less return on investment than ADM Korea. But when comparing it to its historical volatility, SK Hynix is 1.67 times less risky than ADM Korea. It trades about 0.08 of its potential returns per unit of risk. ADM Korea is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 211,500 in ADM Korea on August 26, 2024 and sell it today you would earn a total of 140,000 from holding ADM Korea or generate 66.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Hynix vs. ADM Korea
Performance |
| Timeline |
| SK Hynix |
| ADM Korea |
SK Hynix and ADM Korea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Hynix and ADM Korea
The main advantage of trading using opposite SK Hynix and ADM Korea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, ADM Korea 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 ADM Korea will offset losses from the drop in ADM Korea's long position.| SK Hynix vs. Korea Real Estate | SK Hynix vs. Korea Ratings Co | SK Hynix vs. IQuest Co | SK Hynix vs. Wonbang Tech Co |
| ADM Korea vs. Samsung Electronics Co | ADM Korea vs. Samsung Electronics Co | ADM Korea vs. LG Energy Solution | ADM Korea vs. SK Hynix |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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