Correlation Between SK TELECOM and Tsingtao Brewery

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

Diversification Opportunities for SK TELECOM and Tsingtao Brewery

-0.2

Correlation Coefficient

SK TELECOM  Tsingtao Brewery

Good diversification

The 3 months correlation between KMBA and Tsingtao is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of SK TELECOM i.e., SK TELECOM and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between SK TELECOM and Tsingtao Brewery

Assuming the 90 days trading horizon SK TELECOM is expected to generate 18.92 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, SK TELECOM TDADR is 1.52 times less risky than Tsingtao Brewery. It trades about 0.01 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  478.00  in Tsingtao Brewery on September 19, 2024 and sell it today you would earn a total of  189.00  from holding Tsingtao Brewery or generate 39.54% 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.  Tsingtao Brewery

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK TELECOM and Tsingtao Brewery

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

The idea behind SK TELECOM TDADR and Tsingtao Brewery 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.