Correlation Between Basic Materials and SK Telecom
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and SK Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and SK Telecom Co,, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of SK Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and SK Telecom.
Diversification Opportunities for Basic Materials and SK Telecom
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and S1KM34 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and SK Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom Co, and Basic Materials 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 Basic Materials 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 Co, has no effect on the direction of Basic Materials i.e., Basic Materials and SK Telecom go up and down completely randomly.
Pair Corralation between Basic Materials and SK Telecom
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the SK Telecom. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.33 times less risky than SK Telecom. The index trades about -0.05 of its potential returns per unit of risk. The SK Telecom Co, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,536 in SK Telecom Co, on October 12, 2024 and sell it today you would earn a total of 682.00 from holding SK Telecom Co, or generate 26.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Basic Materials vs. SK Telecom Co,
Performance |
| Timeline |
Basic Materials and SK Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
SK Telecom Co,
Pair trading matchups for SK Telecom
Pair Trading with Basic Materials and SK Telecom
The main advantage of trading using opposite Basic Materials and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. ON Semiconductor | Basic Materials vs. Check Point Software | Basic Materials vs. Liberty Broadband | Basic Materials vs. Paycom Software |
| SK Telecom vs. Capital One Financial | SK Telecom vs. Discover Financial Services | SK Telecom vs. Ryanair Holdings plc | SK Telecom vs. Citizens Financial Group, |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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