Correlation Between SK TELECOM and General Dynamics
Can any of the company-specific risk be diversified away by investing in both SK TELECOM and General Dynamics 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 General Dynamics 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 General Dynamics, you can compare the effects of market volatilities on SK TELECOM and General Dynamics 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 General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and General Dynamics.
Diversification Opportunities for SK TELECOM and General Dynamics
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KMBA and General is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of SK TELECOM i.e., SK TELECOM and General Dynamics go up and down completely randomly.
Pair Corralation between SK TELECOM and General Dynamics
Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 1.32 times more return on investment than General Dynamics. However, SK TELECOM is 1.32 times more volatile than General Dynamics. It trades about 0.05 of its potential returns per unit of risk. General Dynamics is currently generating about 0.05 per unit of risk. If you would invest 1,880 in SK TELECOM TDADR on September 4, 2024 and sell it today you would earn a total of 380.00 from holding SK TELECOM TDADR or generate 20.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK TELECOM TDADR vs. General Dynamics
Performance |
| Timeline |
| SK TELECOM TDADR |
| General Dynamics |
SK TELECOM and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK TELECOM and General Dynamics
The main advantage of trading using opposite SK TELECOM and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK TELECOM position performs unexpectedly, General Dynamics 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 General Dynamics will offset losses from the drop in General Dynamics' long position.The idea behind SK TELECOM TDADR and General Dynamics 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.| General Dynamics vs. SK TELECOM TDADR | General Dynamics vs. InterContinental Hotels Group | General Dynamics vs. NH HOTEL GROUP | General Dynamics vs. Citic Telecom International |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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