Correlation Between SK TELECOM and Meli Hotels

Can any of the company-specific risk be diversified away by investing in both SK TELECOM and Meli Hotels 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 Meli Hotels 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 Meli Hotels International, you can compare the effects of market volatilities on SK TELECOM and Meli Hotels 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 Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and Meli Hotels.

Diversification Opportunities for SK TELECOM and Meli Hotels

0.48

Correlation Coefficient

SK TELECOM  Meli Hotels

Very weak diversification

The 3 months correlation between KMBA and Meli is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meli Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of SK TELECOM i.e., SK TELECOM and Meli Hotels go up and down completely randomly.

Pair Corralation between SK TELECOM and Meli Hotels

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 0.96 times more return on investment than Meli Hotels. However, SK TELECOM TDADR is 1.04 times less risky than Meli Hotels. It trades about -0.08 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.09 per unit of risk. If you would invest  2,040  in SK TELECOM TDADR on December 21, 2024 and sell it today you would lose (160.00) from holding SK TELECOM TDADR or give up 7.84% of portfolio value over 90 days.

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

SK TELECOM TDADR  vs.  Meli Hotels International

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.

Meli Hotels International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators 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 SK TELECOM and Meli Hotels

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

The idea behind SK TELECOM TDADR and Meli Hotels International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.