Correlation Between SK Telecom and Samsung SDI

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

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

Diversification Opportunities for SK Telecom and Samsung SDI

-0.35

Correlation Coefficient

SK Telecom  Samsung SDI

Very good diversification

The 3 months correlation between 017670 and Samsung is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Samsung SDI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung SDI and SK Telecom 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 Telecom Co are associated (or correlated) with Samsung SDI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung SDI has no effect on the direction of SK Telecom i.e., SK Telecom and Samsung SDI go up and down completely randomly.

Pair Corralation between SK Telecom and Samsung SDI

Assuming the 90 days trading horizon SK Telecom Co is expected to generate 0.43 times more return on investment than Samsung SDI. However, SK Telecom Co is 2.34 times less risky than Samsung SDI. It trades about 0.03 of its potential returns per unit of risk. Samsung SDI is currently generating about -0.18 per unit of risk. If you would invest  5,667,716  in SK Telecom Co on September 20, 2024 and sell it today you would earn a total of  92,284  from holding SK Telecom Co or generate 1.63% return on investment over 90 days.

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

SK Telecom Co  vs.  Samsung SDI

SK Telecom

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SK Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SK Telecom and Samsung SDI

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

The idea behind SK Telecom Co and Samsung SDI 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.