Correlation Between Vodacom Group and SK Telecom

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

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

Diversification Opportunities for Vodacom Group and SK Telecom

0.6

Correlation Coefficient

Vodacom Group  SK Telecom

Poor diversification

The 3 months correlation between Vodacom and SKM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vodacom Group Ltd and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom and Vodacom Group 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 Vodacom Group Ltd 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 Vodacom Group i.e., Vodacom Group and SK Telecom go up and down completely randomly.

Pair Corralation between Vodacom Group and SK Telecom

Assuming the 90 days horizon Vodacom Group Ltd is expected to generate 1.38 times more return on investment than SK Telecom. However, Vodacom Group is 1.38 times more volatile than SK Telecom Co. It trades about -0.08 of its potential returns per unit of risk. SK Telecom Co is currently generating about -0.16 per unit of risk. If you would invest  562.00  in Vodacom Group Ltd on September 26, 2024 and sell it today you would lose (21.00) from holding Vodacom Group Ltd or give up 3.74% of portfolio value over 90 days.

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

Vodacom Group Ltd  vs.  SK Telecom Co

Vodacom Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodacom Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 inconsistent 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.

Pair Trading with Vodacom Group and SK Telecom

The main advantage of trading using opposite Vodacom Group and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodacom Group 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 Vodacom Group Ltd 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.