Correlation Between MTN Group and SK Telecom

Can any of the company-specific risk be diversified away by investing in both MTN Group and SK Telecom 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 MTN Group and SK Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTN Group Ltd and SK Telecom Co, you can compare the effects of market volatilities on MTN Group and SK Telecom 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 MTN Group with a short position of SK Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and SK Telecom.

Diversification Opportunities for MTN Group and SK Telecom

0.56

Correlation Coefficient

MTN Group  SK Telecom

Very weak diversification

The 3 months correlation between MTN and SKM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom and MTN Group 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 MTN Group Ltd are associated (or correlated) with SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom has no effect on the direction of MTN Group i.e., MTN Group and SK Telecom go up and down completely randomly.

Pair Corralation between MTN Group and SK Telecom

Assuming the 90 days horizon MTN Group Ltd is expected to under-perform the SK Telecom. In addition to that, MTN Group is 1.98 times more volatile than SK Telecom Co. It trades about -0.03 of its total potential returns per unit of risk. SK Telecom Co is currently generating about 0.03 per unit of volatility. If you would invest  1,866  in SK Telecom Co on September 26, 2024 and sell it today you would earn a total of  300.00  from holding SK Telecom Co or generate 16.08% return on investment over 90 days.

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

MTN Group Ltd  vs.  SK Telecom Co

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SK Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MTN Group and SK Telecom

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

The idea behind MTN Group Ltd and SK Telecom Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.