Correlation Between SK Chemicals and Home Center
Can any of the company-specific risk be diversified away by investing in both SK Chemicals and Home Center 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 Chemicals and Home Center into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Chemicals Co and Home Center Holdings, you can compare the effects of market volatilities on SK Chemicals and Home Center 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 Chemicals with a short position of Home Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and Home Center.
Diversification Opportunities for SK Chemicals and Home Center
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 285130 and Home is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings and SK Chemicals 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 Chemicals Co are associated (or correlated) with Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of SK Chemicals i.e., SK Chemicals and Home Center go up and down completely randomly.
Pair Corralation between SK Chemicals and Home Center
Assuming the 90 days trading horizon SK Chemicals Co is expected to generate 1.05 times more return on investment than Home Center. However, SK Chemicals is 1.05 times more volatile than Home Center Holdings. It trades about -0.06 of its potential returns per unit of risk. Home Center Holdings is currently generating about -0.07 per unit of risk. If you would invest 7,278,458 in SK Chemicals Co on August 30, 2024 and sell it today you would lose (3,008,458) from holding SK Chemicals Co or give up 41.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. Home Center Holdings
Performance |
| Timeline |
| SK Chemicals |
| Home Center Holdings |
SK Chemicals and Home Center Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and Home Center
The main advantage of trading using opposite SK Chemicals and Home Center positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals position performs unexpectedly, Home Center 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 Home Center will offset losses from the drop in Home Center's long position.| SK Chemicals vs. Woori Technology Investment | SK Chemicals vs. Dongbu Insurance Co | SK Chemicals vs. Korea Computer | SK Chemicals vs. E Investment Development |
| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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