Correlation Between SK Chemicals and CU Tech

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

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

Diversification Opportunities for SK Chemicals and CU Tech

-0.19

Correlation Coefficient

SK Chemicals  CU Tech

Good diversification

The 3 months correlation between 285130 and 376290 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and CU Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CU Tech Corp and SK Chemicals 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 Chemicals Co are associated (or correlated) with CU Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CU Tech Corp has no effect on the direction of SK Chemicals i.e., SK Chemicals and CU Tech go up and down completely randomly.

Pair Corralation between SK Chemicals and CU Tech

Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the CU Tech. In addition to that, SK Chemicals is 1.48 times more volatile than CU Tech Corp. It trades about -0.06 of its total potential returns per unit of risk. CU Tech Corp is currently generating about 0.12 per unit of volatility. If you would invest  295,000  in CU Tech Corp on December 24, 2024 and sell it today you would earn a total of  25,000  from holding CU Tech Corp or generate 8.47% return on investment over 90 days.

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

SK Chemicals Co  vs.  CU Tech Corp

SK Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CU Tech Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CU Tech Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CU Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SK Chemicals and CU Tech

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

The idea behind SK Chemicals Co and CU Tech Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.