Correlation Between SK Hynix and Top Material

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

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

Diversification Opportunities for SK Hynix and Top Material

0.31

Correlation Coefficient

SK Hynix  Top Material

Weak diversification

The 3 months correlation between 000660 and Top is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material 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 Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of SK Hynix i.e., SK Hynix and Top Material go up and down completely randomly.

Pair Corralation between SK Hynix and Top Material

Assuming the 90 days trading horizon SK Hynix is expected to generate 0.58 times more return on investment than Top Material. However, SK Hynix is 1.72 times less risky than Top Material. It trades about 0.09 of its potential returns per unit of risk. Top Material Co is currently generating about 0.05 per unit of risk. If you would invest  17,278,200  in SK Hynix on December 28, 2024 and sell it today you would earn a total of  2,651,800  from holding SK Hynix or generate 15.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

SK Hynix  vs.  Top Material Co

SK Hynix

Risk-Adjusted Performance

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.

Top Material

Risk-Adjusted Performance

Insignificant

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

Pair Trading with SK Hynix and Top Material

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

The idea behind SK Hynix and Top Material 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.