Correlation Between SK TELECOM and Penn National

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

Diversification Opportunities for SK TELECOM and Penn National

0.44

Correlation Coefficient

SK TELECOM  Penn National

Very weak diversification

The 3 months correlation between KMBA and Penn is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of SK TELECOM i.e., SK TELECOM and Penn National go up and down completely randomly.

Pair Corralation between SK TELECOM and Penn National

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to generate 0.76 times more return on investment than Penn National. However, SK TELECOM TDADR is 1.31 times less risky than Penn National. It trades about 0.04 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.02 per unit of risk. If you would invest  1,840  in SK TELECOM TDADR on September 30, 2024 and sell it today you would earn a total of  180.00  from holding SK TELECOM TDADR or generate 9.78% return on investment over 90 days.

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

SK TELECOM TDADR  vs.  Penn National Gaming

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.

Penn National Gaming

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SK TELECOM and Penn National

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

The idea behind SK TELECOM TDADR and Penn National Gaming 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.