Correlation Between SK Telecom and BAIC MotorLimited
Can any of the company-specific risk be diversified away by investing in both SK Telecom and BAIC MotorLimited 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 BAIC MotorLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Telecom Co and BAIC Motor, you can compare the effects of market volatilities on SK Telecom and BAIC MotorLimited 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 BAIC MotorLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and BAIC MotorLimited.
Diversification Opportunities for SK Telecom and BAIC MotorLimited
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SKM and BAIC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and BAIC Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIC MotorLimited 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 Co are associated (or correlated) with BAIC MotorLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIC MotorLimited has no effect on the direction of SK Telecom i.e., SK Telecom and BAIC MotorLimited go up and down completely randomly.
Pair Corralation between SK Telecom and BAIC MotorLimited
Considering the 90-day investment horizon SK Telecom is expected to generate 2.13 times less return on investment than BAIC MotorLimited. But when comparing it to its historical volatility, SK Telecom Co is 2.79 times less risky than BAIC MotorLimited. It trades about 0.05 of its potential returns per unit of risk. BAIC Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 22.00 in BAIC Motor on September 1, 2024 and sell it today you would earn a total of 8.00 from holding BAIC Motor or generate 36.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Telecom Co vs. BAIC Motor
Performance |
| Timeline |
| SK Telecom |
| BAIC MotorLimited |
SK Telecom and BAIC MotorLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Telecom and BAIC MotorLimited
The main advantage of trading using opposite SK Telecom and BAIC MotorLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom position performs unexpectedly, BAIC MotorLimited 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 BAIC MotorLimited will offset losses from the drop in BAIC MotorLimited's long position.| SK Telecom vs. TIM Participacoes SA | SK Telecom vs. PLDT Inc ADR | SK Telecom vs. Liberty Broadband Srs | SK Telecom vs. Liberty Broadband Srs |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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