Correlation Between SK Telecom and Bristol Myers

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

Diversification Opportunities for SK Telecom and Bristol Myers

-0.4

Correlation Coefficient

SK Telecom  Bristol Myers

Very good diversification

The 3 months correlation between SKM and Bristol is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of SK Telecom i.e., SK Telecom and Bristol Myers go up and down completely randomly.

Pair Corralation between SK Telecom and Bristol Myers

Considering the 90-day investment horizon SK Telecom Co is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, SK Telecom Co is 2.8 times less risky than Bristol Myers. The stock trades about 0.0 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  88,895  in Bristol Myers Squibb on October 22, 2024 and sell it today you would earn a total of  4,627  from holding Bristol Myers Squibb or generate 5.21% return on investment over 90 days.

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

SK Telecom Co  vs.  Bristol Myers Squibb

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 weak 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.

Bristol Myers Squibb

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Telecom and Bristol Myers

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

The idea behind SK Telecom Co and Bristol Myers Squibb 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.