Correlation Between SK TELECOM and Strategic Education

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

Diversification Opportunities for SK TELECOM and Strategic Education

0.51

Correlation Coefficient

SK TELECOM  Strategic Education

Very weak diversification

The 3 months correlation between KMBA and Strategic is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of SK TELECOM i.e., SK TELECOM and Strategic Education go up and down completely randomly.

Pair Corralation between SK TELECOM and Strategic Education

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to under-perform the Strategic Education. But the stock apears to be less risky and, when comparing its historical volatility, SK TELECOM TDADR is 1.28 times less risky than Strategic Education. The stock trades about -0.31 of its potential returns per unit of risk. The Strategic Education is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  9,400  in Strategic Education on October 5, 2024 and sell it today you would lose (600.00) from holding Strategic Education or give up 6.38% 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.  Strategic Education

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.

Strategic Education

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Strategic Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Strategic Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK TELECOM and Strategic Education

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

The idea behind SK TELECOM TDADR and Strategic Education 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.