Correlation Between SK Hynix and KB No2

Can any of the company-specific risk be diversified away by investing in both SK Hynix and KB No2 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 KB No2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SK Hynix and KB No2 Special, you can compare the effects of market volatilities on SK Hynix and KB No2 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 KB No2. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and KB No2.

Diversification Opportunities for SK Hynix and KB No2

0.8

Correlation Coefficient

SK Hynix  KB No2

Very poor diversification

The 3 months correlation between 000660 and 192250 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and KB No2 Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB No2 Special 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 KB No2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB No2 Special has no effect on the direction of SK Hynix i.e., SK Hynix and KB No2 go up and down completely randomly.

Pair Corralation between SK Hynix and KB No2

Assuming the 90 days trading horizon SK Hynix is expected to generate 1.98 times more return on investment than KB No2. However, SK Hynix is 1.98 times more volatile than KB No2 Special. It trades about -0.09 of its potential returns per unit of risk. KB No2 Special is currently generating about -0.54 per unit of risk. If you would invest  19,682,700  in SK Hynix on December 10, 2024 and sell it today you would lose (892,700) from holding SK Hynix or give up 4.54% of portfolio value over 90 days.

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

SK Hynix  vs.  KB No2 Special

SK Hynix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 5 (%) 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.

KB No2 Special

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB No2 Special are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB No2 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Hynix and KB No2

The main advantage of trading using opposite SK Hynix and KB No2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Hynix position performs unexpectedly, KB No2 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 KB No2 will offset losses from the drop in KB No2's long position.

The idea behind SK Hynix and KB No2 Special 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.