Correlation Between SK Hynix and Ecocab

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

By analyzing existing cross correlation between SK Hynix and Ecocab Co, you can compare the effects of market volatilities on SK Hynix and Ecocab 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 Ecocab. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and Ecocab.

Diversification Opportunities for SK Hynix and Ecocab

-0.44

Correlation Coefficient

SK Hynix  Ecocab

Very good diversification

The 3 months correlation between 000660 and Ecocab is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and Ecocab Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecocab 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 Ecocab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecocab has no effect on the direction of SK Hynix i.e., SK Hynix and Ecocab go up and down completely randomly.

Pair Corralation between SK Hynix and Ecocab

Assuming the 90 days trading horizon SK Hynix is expected to generate 3.49 times less return on investment than Ecocab. But when comparing it to its historical volatility, SK Hynix is 2.07 times less risky than Ecocab. It trades about 0.03 of its potential returns per unit of risk. Ecocab Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  149,900  in Ecocab Co on September 4, 2024 and sell it today you would earn a total of  12,700  from holding Ecocab Co or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SK Hynix  vs.  Ecocab Co

SK Hynix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ecocab

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecocab Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecocab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Hynix and Ecocab

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

The idea behind SK Hynix and Ecocab Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.