Correlation Between Traton SE and SK TELECOM

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

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

Diversification Opportunities for Traton SE and SK TELECOM

0.44

Correlation Coefficient

Traton SE  SK TELECOM

Very weak diversification

The 3 months correlation between Traton and KMBA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Traton SE 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 Traton SE 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 Traton SE 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 Traton SE i.e., Traton SE and SK TELECOM go up and down completely randomly.

Pair Corralation between Traton SE and SK TELECOM

Assuming the 90 days trading horizon Traton SE is expected to generate 1.71 times more return on investment than SK TELECOM. However, Traton SE is 1.71 times more volatile than SK TELECOM TDADR. It trades about 0.14 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about -0.09 per unit of risk. If you would invest  2,965  in Traton SE on December 4, 2024 and sell it today you would earn a total of  605.00  from holding Traton SE or generate 20.4% return on investment over 90 days.

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

Traton SE  vs.  SK TELECOM TDADR

Traton SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Traton SE reported solid returns over the last few months and may actually be approaching a breakup point.

SK TELECOM TDADR

Risk-Adjusted Performance

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 latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Traton SE and SK TELECOM

The main advantage of trading using opposite Traton SE and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Traton SE 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 Traton SE 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.