Correlation Between SK TELECOM and Thyssenkrupp

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

Diversification Opportunities for SK TELECOM and Thyssenkrupp

0.28

Correlation Coefficient

SK TELECOM  Thyssenkrupp

Modest diversification

The 3 months correlation between KMBA and Thyssenkrupp is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of SK TELECOM i.e., SK TELECOM and Thyssenkrupp go up and down completely randomly.

Pair Corralation between SK TELECOM and Thyssenkrupp

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, SK TELECOM TDADR is 3.87 times less risky than Thyssenkrupp. The stock trades about -0.09 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  390.00  in thyssenkrupp AG on October 26, 2024 and sell it today you would earn a total of  30.00  from holding thyssenkrupp AG or generate 7.69% return on investment over 90 days.

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

SK TELECOM TDADR  vs.  thyssenkrupp AG

SK TELECOM TDADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK TELECOM TDADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

thyssenkrupp AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK TELECOM and Thyssenkrupp

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

The idea behind SK TELECOM TDADR and thyssenkrupp AG 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.