Correlation Between Banco Santander and SK Telecom

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

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

Diversification Opportunities for Banco Santander and SK Telecom

0.22

Correlation Coefficient

Banco Santander  SK Telecom

Modest diversification

The 3 months correlation between Banco and S1KM34 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Chile and SK Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom Co, and Banco Santander 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 Banco Santander Chile 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 Co, has no effect on the direction of Banco Santander i.e., Banco Santander and SK Telecom go up and down completely randomly.

Pair Corralation between Banco Santander and SK Telecom

Assuming the 90 days trading horizon Banco Santander is expected to generate 1.15 times less return on investment than SK Telecom. But when comparing it to its historical volatility, Banco Santander Chile is 1.0 times less risky than SK Telecom. It trades about 0.07 of its potential returns per unit of risk. SK Telecom Co, is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,703  in SK Telecom Co, on October 9, 2024 and sell it today you would earn a total of  515.00  from holding SK Telecom Co, or generate 19.05% return on investment over 90 days.

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

Banco Santander Chile  vs.  SK Telecom Co,

Banco Santander Chile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SK Telecom Co,

Risk-Adjusted Performance

1 of 100

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 forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Santander and SK Telecom

The main advantage of trading using opposite Banco Santander and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Santander 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 Banco Santander Chile and SK Telecom Co, 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.