Correlation Between SK TELECOM and China Resources

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

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

Diversification Opportunities for SK TELECOM and China Resources

-0.35

Correlation Coefficient

SK TELECOM  China Resources

Very good diversification

The 3 months correlation between KMBA and China is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 TDADR are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of SK TELECOM i.e., SK TELECOM and China Resources go up and down completely randomly.

Pair Corralation between SK TELECOM and China Resources

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 0.79 times more return on investment than China Resources. However, SK TELECOM TDADR is 1.27 times less risky than China Resources. It trades about 0.1 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.04 per unit of risk. If you would invest  1,940  in SK TELECOM TDADR on September 20, 2024 and sell it today you would earn a total of  100.00  from holding SK TELECOM TDADR or generate 5.15% return on investment over 90 days.

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

SK TELECOM TDADR  vs.  China Resources Beer

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.

China Resources Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK TELECOM and China Resources

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

The idea behind SK TELECOM TDADR and China Resources Beer 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.