Correlation Between SK Telecom and Telefonica
Can any of the company-specific risk be diversified away by investing in both SK Telecom and Telefonica 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 Telefonica 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 Telefonica SA ADR, you can compare the effects of market volatilities on SK Telecom and Telefonica 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 Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and Telefonica.
Diversification Opportunities for SK Telecom and Telefonica
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SKM and Telefonica is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR 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 Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of SK Telecom i.e., SK Telecom and Telefonica go up and down completely randomly.
Pair Corralation between SK Telecom and Telefonica
Considering the 90-day investment horizon SK Telecom Co is expected to generate 0.76 times more return on investment than Telefonica. However, SK Telecom Co is 1.32 times less risky than Telefonica. It trades about -0.04 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about -0.15 per unit of risk. If you would invest 2,298 in SK Telecom Co on August 27, 2024 and sell it today you would lose (20.00) from holding SK Telecom Co or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Telecom Co vs. Telefonica SA ADR
Performance |
| Timeline |
| SK Telecom |
| Telefonica SA ADR |
SK Telecom and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Telecom and Telefonica
The main advantage of trading using opposite SK Telecom and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica's long position.| SK Telecom vs. Anterix | SK Telecom vs. Liberty Broadband Corp | SK Telecom vs. Ooma Inc | SK Telecom vs. IDT Corporation |
| Telefonica vs. Liberty Broadband Srs | Telefonica vs. Ribbon Communications | Telefonica vs. Liberty Broadband Srs | Telefonica vs. Shenandoah Telecommunications Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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