Correlation Between SK Telecom and Finebesteel

Can any of the company-specific risk be diversified away by investing in both SK Telecom and Finebesteel 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 Finebesteel 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 Finebesteel, you can compare the effects of market volatilities on SK Telecom and Finebesteel 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 Finebesteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and Finebesteel.

Diversification Opportunities for SK Telecom and Finebesteel

0.27

Correlation Coefficient

SK Telecom  Finebesteel

Modest diversification

The 3 months correlation between 017670 and Finebesteel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel 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 Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of SK Telecom i.e., SK Telecom and Finebesteel go up and down completely randomly.

Pair Corralation between SK Telecom and Finebesteel

Assuming the 90 days trading horizon SK Telecom is expected to generate 4.5 times less return on investment than Finebesteel. But when comparing it to its historical volatility, SK Telecom Co is 2.82 times less risky than Finebesteel. It trades about 0.02 of its potential returns per unit of risk. Finebesteel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  92,300  in Finebesteel on December 27, 2024 and sell it today you would earn a total of  3,000  from holding Finebesteel or generate 3.25% return on investment over 90 days.

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

SK Telecom Co  vs.  Finebesteel

SK Telecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co are ranked lower than 1 (%) 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.

Finebesteel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Finebesteel 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 Telecom and Finebesteel

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

The idea behind SK Telecom Co and Finebesteel 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .