Correlation Between SK TELECOM and MTI WIRELESS
Can any of the company-specific risk be diversified away by investing in both SK TELECOM and MTI WIRELESS 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 MTI WIRELESS 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 MTI WIRELESS EDGE, you can compare the effects of market volatilities on SK TELECOM and MTI WIRELESS 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 MTI WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and MTI WIRELESS.
Diversification Opportunities for SK TELECOM and MTI WIRELESS
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KMBA and MTI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and MTI WIRELESS EDGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI WIRELESS EDGE 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 MTI WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI WIRELESS EDGE has no effect on the direction of SK TELECOM i.e., SK TELECOM and MTI WIRELESS go up and down completely randomly.
Pair Corralation between SK TELECOM and MTI WIRELESS
Assuming the 90 days trading horizon SK TELECOM TDADR is expected to under-perform the MTI WIRELESS. In addition to that, SK TELECOM is 1.31 times more volatile than MTI WIRELESS EDGE. It trades about -0.1 of its total potential returns per unit of risk. MTI WIRELESS EDGE is currently generating about -0.07 per unit of volatility. If you would invest 49.00 in MTI WIRELESS EDGE on August 24, 2024 and sell it today you would lose (2.00) from holding MTI WIRELESS EDGE or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SK TELECOM TDADR vs. MTI WIRELESS EDGE
Performance |
| Timeline |
| SK TELECOM TDADR |
| MTI WIRELESS EDGE |
SK TELECOM and MTI WIRELESS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK TELECOM and MTI WIRELESS
The main advantage of trading using opposite SK TELECOM and MTI WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK TELECOM position performs unexpectedly, MTI WIRELESS 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 MTI WIRELESS will offset losses from the drop in MTI WIRELESS's long position.The idea behind SK TELECOM TDADR and MTI WIRELESS EDGE 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.| MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc | MTI WIRELESS vs. Apple Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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