Correlation Between Ooma and SK Telecom

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

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

Diversification Opportunities for Ooma and SK Telecom

-0.53

Correlation Coefficient

Ooma  SK Telecom

Excellent diversification

The 3 months correlation between Ooma and SKM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom and Ooma 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 Ooma Inc 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 Ooma i.e., Ooma and SK Telecom go up and down completely randomly.

Pair Corralation between Ooma and SK Telecom

Given the investment horizon of 90 days Ooma Inc is expected to generate 1.45 times more return on investment than SK Telecom. However, Ooma is 1.45 times more volatile than SK Telecom Co. It trades about 0.29 of its potential returns per unit of risk. SK Telecom Co is currently generating about 0.07 per unit of risk. If you would invest  1,040  in Ooma Inc on August 30, 2024 and sell it today you would earn a total of  406.00  from holding Ooma Inc or generate 39.04% return on investment over 90 days.

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

Ooma Inc  vs.  SK Telecom Co

Ooma Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

SK Telecom

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ooma and SK Telecom

The main advantage of trading using opposite Ooma and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ooma 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 Ooma Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.