Correlation Between NatWest Group and SK Telecom

Can any of the company-specific risk be diversified away by investing in both NatWest 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 NatWest 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 NatWest Group plc and SK Telecom Co,, you can compare the effects of market volatilities on NatWest 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 NatWest Group with a short position of SK Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of NatWest Group and SK Telecom.

Diversification Opportunities for NatWest Group and SK Telecom

-0.2

Correlation Coefficient

NatWest Group  SK Telecom

Good diversification

The 3 months correlation between NatWest and S1KM34 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NatWest Group plc and SK Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom Co, and NatWest 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 NatWest Group plc 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 Co, has no effect on the direction of NatWest Group i.e., NatWest Group and SK Telecom go up and down completely randomly.

Pair Corralation between NatWest Group and SK Telecom

Assuming the 90 days trading horizon NatWest Group plc is expected to generate 1.12 times more return on investment than SK Telecom. However, NatWest Group is 1.12 times more volatile than SK Telecom Co,. It trades about 0.12 of its potential returns per unit of risk. SK Telecom Co, is currently generating about -0.08 per unit of risk. If you would invest  6,137  in NatWest Group plc on December 25, 2024 and sell it today you would earn a total of  863.00  from holding NatWest Group plc or generate 14.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

NatWest Group plc  vs.  SK Telecom Co,

NatWest Group plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NatWest Group plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NatWest Group sustained solid returns over the last few months and may actually be approaching a breakup point.

SK Telecom Co,

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK Telecom Co, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NatWest Group and SK Telecom

The main advantage of trading using opposite NatWest Group and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NatWest 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 NatWest Group plc 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.