Correlation Between SK Chemicals and EV Advanced
Can any of the company-specific risk be diversified away by investing in both SK Chemicals and EV Advanced 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 EV Advanced 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 EV Advanced Material, you can compare the effects of market volatilities on SK Chemicals and EV Advanced 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 EV Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and EV Advanced.
Diversification Opportunities for SK Chemicals and EV Advanced
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 285130 and 131400 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and EV Advanced Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EV Advanced Material 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 EV Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EV Advanced Material has no effect on the direction of SK Chemicals i.e., SK Chemicals and EV Advanced go up and down completely randomly.
Pair Corralation between SK Chemicals and EV Advanced
Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the EV Advanced. But the stock apears to be less risky and, when comparing its historical volatility, SK Chemicals Co is 1.36 times less risky than EV Advanced. The stock trades about -0.37 of its potential returns per unit of risk. The EV Advanced Material is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 191,700 in EV Advanced Material on November 8, 2024 and sell it today you would lose (11,400) from holding EV Advanced Material or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. EV Advanced Material
Performance |
| Timeline |
| SK Chemicals |
| EV Advanced Material |
SK Chemicals and EV Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and EV Advanced
The main advantage of trading using opposite SK Chemicals and EV Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals position performs unexpectedly, EV Advanced 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 EV Advanced will offset losses from the drop in EV Advanced's long position.| SK Chemicals vs. LG Chemicals | SK Chemicals vs. POSCO Holdings | SK Chemicals vs. Hanwha Solutions | SK Chemicals vs. Lotte Chemical Corp |
| EV Advanced vs. Samsung Electronics Co | EV Advanced vs. Samsung Electronics Co | EV Advanced vs. Hyundai Motor Co | EV Advanced vs. Hyundai Motor |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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