Correlation Between SK TELECOM and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both SK TELECOM and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on SK TELECOM and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and Hitachi Construction.
Diversification Opportunities for SK TELECOM and Hitachi Construction
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between KMBA and Hitachi is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of SK TELECOM i.e., SK TELECOM and Hitachi Construction go up and down completely randomly.
Pair Corralation between SK TELECOM and Hitachi Construction
Assuming the 90 days trading horizon SK TELECOM TDADR is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, SK TELECOM TDADR is 1.7 times less risky than Hitachi Construction. The stock trades about -0.09 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,060 in Hitachi Construction Machinery on October 29, 2024 and sell it today you would earn a total of 180.00 from holding Hitachi Construction Machinery or generate 8.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
SK TELECOM TDADR vs. Hitachi Construction Machinery
Performance |
| Timeline |
| SK TELECOM TDADR |
| Hitachi Construction |
SK TELECOM and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK TELECOM and Hitachi Construction
The main advantage of trading using opposite SK TELECOM and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK TELECOM position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| SK TELECOM vs. Ryanair Holdings plc | SK TELECOM vs. Wizz Air Holdings | SK TELECOM vs. SYSTEMAIR AB | SK TELECOM vs. STRAYER EDUCATION |
| Hitachi Construction vs. Goosehead Insurance | Hitachi Construction vs. Reinsurance Group of | Hitachi Construction vs. GEELY AUTOMOBILE | Hitachi Construction vs. Zurich Insurance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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