Correlation Between SK TELECOM and CVS Group
Can any of the company-specific risk be diversified away by investing in both SK TELECOM and CVS Group 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 TELECOM and CVS Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK TELECOM TDADR and CVS Group plc, you can compare the effects of market volatilities on SK TELECOM and CVS Group 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 TELECOM with a short position of CVS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and CVS Group.
Diversification Opportunities for SK TELECOM and CVS Group
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KMBA and CVS is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and CVS Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Group plc and SK TELECOM 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 TELECOM TDADR are associated (or correlated) with CVS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Group plc has no effect on the direction of SK TELECOM i.e., SK TELECOM and CVS Group go up and down completely randomly.
Pair Corralation between SK TELECOM and CVS Group
Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 0.73 times more return on investment than CVS Group. However, SK TELECOM TDADR is 1.36 times less risky than CVS Group. It trades about 0.03 of its potential returns per unit of risk. CVS Group plc is currently generating about -0.05 per unit of risk. If you would invest 1,883 in SK TELECOM TDADR on September 5, 2024 and sell it today you would earn a total of 357.00 from holding SK TELECOM TDADR or generate 18.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.85% |
| Values | Daily Returns |
SK TELECOM TDADR vs. CVS Group plc
Performance |
| Timeline |
| SK TELECOM TDADR |
| CVS Group plc |
SK TELECOM and CVS Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK TELECOM and CVS Group
The main advantage of trading using opposite SK TELECOM and CVS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK TELECOM position performs unexpectedly, CVS Group 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 CVS Group will offset losses from the drop in CVS Group's long position.The idea behind SK TELECOM TDADR and CVS Group plc 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.| CVS Group vs. Ribbon Communications | CVS Group vs. SK TELECOM TDADR | CVS Group vs. Charter Communications | CVS Group vs. Gamma Communications plc |
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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