Correlation Between SK Hynix and KTB Investment

Can any of the company-specific risk be diversified away by investing in both SK Hynix and KTB Investment 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 Hynix and KTB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SK Hynix and KTB Investment Securities, you can compare the effects of market volatilities on SK Hynix and KTB Investment 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 Hynix with a short position of KTB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and KTB Investment.

Diversification Opportunities for SK Hynix and KTB Investment

0.14

Correlation Coefficient

SK Hynix  KTB Investment

Average diversification

The 3 months correlation between 000660 and KTB is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and KTB Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTB Investment Securities and SK Hynix 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 Hynix are associated (or correlated) with KTB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTB Investment Securities has no effect on the direction of SK Hynix i.e., SK Hynix and KTB Investment go up and down completely randomly.

Pair Corralation between SK Hynix and KTB Investment

Assuming the 90 days trading horizon SK Hynix is expected to generate 0.95 times more return on investment than KTB Investment. However, SK Hynix is 1.05 times less risky than KTB Investment. It trades about 0.08 of its potential returns per unit of risk. KTB Investment Securities is currently generating about 0.02 per unit of risk. If you would invest  7,454,549  in SK Hynix on September 20, 2024 and sell it today you would earn a total of  10,045,451  from holding SK Hynix or generate 134.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SK Hynix  vs.  KTB Investment Securities

SK Hynix

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix sustained solid returns over the last few months and may actually be approaching a breakup point.

KTB Investment Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KTB Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SK Hynix and KTB Investment

The main advantage of trading using opposite SK Hynix and KTB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, KTB Investment 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 KTB Investment will offset losses from the drop in KTB Investment's long position.

The idea behind SK Hynix and KTB Investment Securities 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .