Correlation Between SK Telecom and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both SK Telecom and Vodafone Group 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 Vodafone Group 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 Vodafone Group PLC, you can compare the effects of market volatilities on SK Telecom and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and Vodafone Group.
Diversification Opportunities for SK Telecom and Vodafone Group
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SKM and Vodafone is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of SK Telecom i.e., SK Telecom and Vodafone Group go up and down completely randomly.
Pair Corralation between SK Telecom and Vodafone Group
Considering the 90-day investment horizon SK Telecom Co is expected to generate 0.57 times more return on investment than Vodafone Group. However, SK Telecom Co is 1.75 times less risky than Vodafone Group. It trades about 0.21 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.09 per unit of risk. If you would invest 2,276 in SK Telecom Co on September 1, 2024 and sell it today you would earn a total of 146.00 from holding SK Telecom Co or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Telecom Co vs. Vodafone Group PLC
Performance |
| Timeline |
| SK Telecom |
| Vodafone Group PLC |
SK Telecom and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Telecom and Vodafone Group
The main advantage of trading using opposite SK Telecom and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group'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 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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