Correlation Between SK Hynix and Nable Communications

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

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

Diversification Opportunities for SK Hynix and Nable Communications

-0.36

Correlation Coefficient

SK Hynix  Nable Communications

Very good diversification

The 3 months correlation between 000660 and Nable is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and Nable Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nable Communications 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 Nable Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nable Communications has no effect on the direction of SK Hynix i.e., SK Hynix and Nable Communications go up and down completely randomly.

Pair Corralation between SK Hynix and Nable Communications

Assuming the 90 days trading horizon SK Hynix is expected to generate 2.5 times more return on investment than Nable Communications. However, SK Hynix is 2.5 times more volatile than Nable Communications. It trades about 0.1 of its potential returns per unit of risk. Nable Communications is currently generating about 0.07 per unit of risk. If you would invest  15,683,900  in SK Hynix on September 20, 2024 and sell it today you would earn a total of  2,666,100  from holding SK Hynix or generate 17.0% return on investment over 90 days.

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

SK Hynix  vs.  Nable Communications

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.

Nable Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nable Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nable Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SK Hynix and Nable Communications

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

The idea behind SK Hynix and Nable Communications 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.