Correlation Between SK Telecom and Tyson Foods

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

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

Diversification Opportunities for SK Telecom and Tyson Foods

0.68

Correlation Coefficient

SK Telecom  Tyson Foods

Poor diversification

The 3 months correlation between S1KM34 and Tyson is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co, and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Co, are associated (or correlated) with Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of SK Telecom i.e., SK Telecom and Tyson Foods go up and down completely randomly.

Pair Corralation between SK Telecom and Tyson Foods

Assuming the 90 days trading horizon SK Telecom Co, is expected to under-perform the Tyson Foods. But the stock apears to be less risky and, when comparing its historical volatility, SK Telecom Co, is 1.11 times less risky than Tyson Foods. The stock trades about -0.29 of its potential returns per unit of risk. The Tyson Foods is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  38,883  in Tyson Foods on October 4, 2024 and sell it today you would lose (3,063) from holding Tyson Foods or give up 7.88% of portfolio value over 90 days.

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

SK Telecom Co,  vs.  Tyson Foods

SK Telecom Co,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tyson Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Telecom and Tyson Foods

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

The idea behind SK Telecom Co, and Tyson Foods 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.