Correlation Between SK Telecom and Homeland Security

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

Diversification Opportunities for SK Telecom and Homeland Security

-0.03

Correlation Coefficient

SK Telecom  Homeland Security

Good diversification

The 3 months correlation between SKM and Homeland is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and Homeland Security Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeland Security 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 Homeland Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeland Security has no effect on the direction of SK Telecom i.e., SK Telecom and Homeland Security go up and down completely randomly.

Pair Corralation between SK Telecom and Homeland Security

Considering the 90-day investment horizon SK Telecom is expected to generate 2703.0 times less return on investment than Homeland Security. But when comparing it to its historical volatility, SK Telecom Co is 7.75 times less risky than Homeland Security. It trades about 0.0 of its potential returns per unit of risk. Homeland Security Cp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Homeland Security Cp on December 27, 2024 and sell it today you would earn a total of  0.05  from holding Homeland Security Cp or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

SK Telecom Co  vs.  Homeland Security Cp

SK Telecom

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. 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.

Homeland Security

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Homeland Security Cp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Homeland Security exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Telecom and Homeland Security

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

The idea behind SK Telecom Co and Homeland Security Cp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..