Correlation Between SK Telecom and PLDT

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

Diversification Opportunities for SK Telecom and PLDT

0.28

Correlation Coefficient

SK Telecom  PLDT

Modest diversification

The 3 months correlation between SKM and PLDT is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and PLDT Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLDT Inc ADR 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 PLDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLDT Inc ADR has no effect on the direction of SK Telecom i.e., SK Telecom and PLDT go up and down completely randomly.

Pair Corralation between SK Telecom and PLDT

Considering the 90-day investment horizon SK Telecom Co is expected to under-perform the PLDT. But the stock apears to be less risky and, when comparing its historical volatility, SK Telecom Co is 1.12 times less risky than PLDT. The stock trades about -0.01 of its potential returns per unit of risk. The PLDT Inc ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,204  in PLDT Inc ADR on December 26, 2024 and sell it today you would earn a total of  16.00  from holding PLDT Inc ADR or generate 0.73% return on investment over 90 days.

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

SK Telecom Co  vs.  PLDT Inc ADR

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.

PLDT Inc ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PLDT Inc ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, PLDT is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SK Telecom and PLDT

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

The idea behind SK Telecom Co and PLDT Inc ADR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.