Correlation Between SK TELECOM and Target
Can any of the company-specific risk be diversified away by investing in both SK TELECOM and Target 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 Target 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 Target, you can compare the effects of market volatilities on SK TELECOM and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and Target.
Diversification Opportunities for SK TELECOM and Target
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KMBA and Target is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of SK TELECOM i.e., SK TELECOM and Target go up and down completely randomly.
Pair Corralation between SK TELECOM and Target
Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 0.75 times more return on investment than Target. However, SK TELECOM TDADR is 1.32 times less risky than Target. It trades about 0.03 of its potential returns per unit of risk. Target is currently generating about -0.02 per unit of risk. If you would invest 2,000 in SK TELECOM TDADR on October 21, 2024 and sell it today you would earn a total of 40.00 from holding SK TELECOM TDADR or generate 2.0% 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. Target
Performance |
Timeline |
SK TELECOM TDADR |
Target |
SK TELECOM and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SK TELECOM and Target
The main advantage of trading using opposite SK TELECOM and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK TELECOM position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.SK TELECOM vs. Erste Group Bank | ||
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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