Correlation Between Sims Metal and SK TELECOM
Can any of the company-specific risk be diversified away by investing in both Sims Metal 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 Sims Metal and SK TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sims Metal Management and SK TELECOM TDADR, you can compare the effects of market volatilities on Sims Metal 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 Sims Metal with a short position of SK TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and SK TELECOM.
Diversification Opportunities for Sims Metal and SK TELECOM
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sims and KMBA is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management 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 Sims Metal 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 Sims Metal Management 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 Sims Metal i.e., Sims Metal and SK TELECOM go up and down completely randomly.
Pair Corralation between Sims Metal and SK TELECOM
Assuming the 90 days horizon Sims Metal is expected to generate 3.47 times less return on investment than SK TELECOM. But when comparing it to its historical volatility, Sims Metal Management is 1.45 times less risky than SK TELECOM. It trades about 0.1 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,920 in SK TELECOM TDADR on September 3, 2024 and sell it today you would earn a total of 340.00 from holding SK TELECOM TDADR or generate 17.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. SK TELECOM TDADR
Performance |
| Timeline |
| Sims Metal Management |
| SK TELECOM TDADR |
Sims Metal and SK TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and SK TELECOM
The main advantage of trading using opposite Sims Metal and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal 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.| Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. POSCO Holdings |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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