Correlation Between SK Telecom and Dongfeng
Can any of the company-specific risk be diversified away by investing in both SK Telecom and Dongfeng 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 Dongfeng 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 Dongfeng Group, you can compare the effects of market volatilities on SK Telecom and Dongfeng 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 Dongfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and Dongfeng.
Diversification Opportunities for SK Telecom and Dongfeng
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SKM and Dongfeng is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Group 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 Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of SK Telecom i.e., SK Telecom and Dongfeng go up and down completely randomly.
Pair Corralation between SK Telecom and Dongfeng
Considering the 90-day investment horizon SK Telecom is expected to generate 8.18 times less return on investment than Dongfeng. But when comparing it to its historical volatility, SK Telecom Co is 6.38 times less risky than Dongfeng. It trades about 0.2 of its potential returns per unit of risk. Dongfeng Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Dongfeng Group on August 31, 2024 and sell it today you would earn a total of 16.00 from holding Dongfeng Group or generate 53.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
SK Telecom Co vs. Dongfeng Group
Performance |
| Timeline |
| SK Telecom |
| Dongfeng Group |
SK Telecom and Dongfeng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Telecom and Dongfeng
The main advantage of trading using opposite SK Telecom and Dongfeng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom position performs unexpectedly, Dongfeng 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 Dongfeng will offset losses from the drop in Dongfeng's long position.| SK Telecom vs. RLJ Lodging Trust | SK Telecom vs. Aquagold International | SK Telecom vs. Stepstone Group | SK Telecom vs. Morningstar Unconstrained Allocation |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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