Correlation Between Catalent and SK TELECOM

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

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

Diversification Opportunities for Catalent and SK TELECOM

0.34

Correlation Coefficient

Catalent  SK TELECOM

Weak diversification

The 3 months correlation between Catalent and KMBA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and SK TELECOM TDADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK TELECOM TDADR and Catalent 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 Catalent are associated (or correlated) with SK TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK TELECOM TDADR has no effect on the direction of Catalent i.e., Catalent and SK TELECOM go up and down completely randomly.

Pair Corralation between Catalent and SK TELECOM

Assuming the 90 days horizon Catalent is expected to generate 1.74 times more return on investment than SK TELECOM. However, Catalent is 1.74 times more volatile than SK TELECOM TDADR. It trades about 0.03 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about 0.02 per unit of risk. If you would invest  4,502  in Catalent on October 4, 2024 and sell it today you would earn a total of  1,491  from holding Catalent or generate 33.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.96%
Values	Daily Returns

Catalent  vs.  SK TELECOM TDADR

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SK TELECOM TDADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK TELECOM TDADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, SK TELECOM is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Catalent and SK TELECOM

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

The idea behind Catalent and SK TELECOM TDADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.