Correlation Between CHINA TELECOM and SK TELECOM

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

By analyzing existing cross correlation between CHINA TELECOM H and SK TELECOM TDADR, you can compare the effects of market volatilities on CHINA TELECOM 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 CHINA TELECOM with a short position of SK TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and SK TELECOM.

Diversification Opportunities for CHINA TELECOM and SK TELECOM

-0.25

Correlation Coefficient

CHINA TELECOM  SK TELECOM

Very good diversification

The 3 months correlation between CHINA and KMBA is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and SK TELECOM TDADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK TELECOM TDADR and CHINA 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 CHINA TELECOM H 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 TDADR has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and SK TELECOM go up and down completely randomly.

Pair Corralation between CHINA TELECOM and SK TELECOM

If you would invest  2,040  in SK TELECOM TDADR on September 19, 2024 and sell it today you would earn a total of  60.00  from holding SK TELECOM TDADR or generate 2.94% return on investment over 90 days.

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

CHINA TELECOM H   vs.  SK TELECOM TDADR

CHINA TELECOM H

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA TELECOM H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SK TELECOM TDADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK TELECOM TDADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, SK TELECOM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA TELECOM and SK TELECOM

The main advantage of trading using opposite CHINA TELECOM and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TELECOM 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 CHINA TELECOM H and SK TELECOM TDADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.