Correlation Between Merck and SK TELECOM
Can any of the company-specific risk be diversified away by investing in both Merck and SK TELECOM 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 Merck and SK TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Co and SK TELECOM TDADR, you can compare the effects of market volatilities on Merck and SK TELECOM 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 Merck with a short position of SK TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SK TELECOM.
Diversification Opportunities for Merck and SK TELECOM
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merck and KMBA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Merck Co and SK TELECOM TDADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK TELECOM TDADR and Merck 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 Merck Co are associated (or correlated) with SK TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK TELECOM TDADR has no effect on the direction of Merck i.e., Merck and SK TELECOM go up and down completely randomly.
Pair Corralation between Merck and SK TELECOM
Assuming the 90 days horizon Merck Co is expected to generate 0.42 times more return on investment than SK TELECOM. However, Merck Co is 2.37 times less risky than SK TELECOM. It trades about 0.14 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about 0.02 per unit of risk. If you would invest 9,480 in Merck Co on September 12, 2024 and sell it today you would earn a total of 380.00 from holding Merck Co or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Co vs. SK TELECOM TDADR
Performance |
| Timeline |
| Merck |
| SK TELECOM TDADR |
Merck and SK TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SK TELECOM
The main advantage of trading using opposite Merck and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SK TELECOM 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 SK TELECOM will offset losses from the drop in SK TELECOM's long position.The idea behind Merck Co and SK TELECOM TDADR 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.| SK TELECOM vs. Coor Service Management | SK TELECOM vs. Corporate Travel Management | SK TELECOM vs. AOYAMA TRADING | SK TELECOM vs. CeoTronics AG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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