Correlation Between SK Chemicals and Korea Electric
Can any of the company-specific risk be diversified away by investing in both SK Chemicals and Korea Electric 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 Korea Electric 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 Korea Electric Power, you can compare the effects of market volatilities on SK Chemicals and Korea Electric 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 Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and Korea Electric.
Diversification Opportunities for SK Chemicals and Korea Electric
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 28513K and Korea is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power 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 Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of SK Chemicals i.e., SK Chemicals and Korea Electric go up and down completely randomly.
Pair Corralation between SK Chemicals and Korea Electric
Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the Korea Electric. But the stock apears to be less risky and, when comparing its historical volatility, SK Chemicals Co is 1.48 times less risky than Korea Electric. The stock trades about -0.46 of its potential returns per unit of risk. The Korea Electric Power is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,305,000 in Korea Electric Power on September 2, 2024 and sell it today you would earn a total of 85,000 from holding Korea Electric Power or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. Korea Electric Power
Performance |
| Timeline |
| SK Chemicals |
| Korea Electric Power |
SK Chemicals and Korea Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and Korea Electric
The main advantage of trading using opposite SK Chemicals and Korea Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals position performs unexpectedly, Korea Electric 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 Korea Electric will offset losses from the drop in Korea Electric's long position.The idea behind SK Chemicals Co and Korea Electric Power 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.| Korea Electric vs. Sunny Electronics Corp | Korea Electric vs. Daejoo Electronic Materials | Korea Electric vs. Coloray International Investment | Korea Electric vs. CU Medical Systems |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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