Correlation Between SK Hynix and NHN KCP

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

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

Diversification Opportunities for SK Hynix and NHN KCP

-0.33

Correlation Coefficient

SK Hynix  NHN KCP

Very good diversification

The 3 months correlation between 000660 and NHN is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and NHN KCP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHN KCP Corp and SK Hynix 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 Hynix are associated (or correlated) with NHN KCP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHN KCP Corp has no effect on the direction of SK Hynix i.e., SK Hynix and NHN KCP go up and down completely randomly.

Pair Corralation between SK Hynix and NHN KCP

Assuming the 90 days trading horizon SK Hynix is expected to generate 1.27 times more return on investment than NHN KCP. However, SK Hynix is 1.27 times more volatile than NHN KCP Corp. It trades about 0.09 of its potential returns per unit of risk. NHN KCP Corp is currently generating about 0.1 per unit of risk. If you would invest  15,254,700  in SK Hynix on September 15, 2024 and sell it today you would earn a total of  2,295,300  from holding SK Hynix or generate 15.05% return on investment over 90 days.

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

SK Hynix  vs.  NHN KCP Corp

SK Hynix

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix sustained solid returns over the last few months and may actually be approaching a breakup point.

NHN KCP Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NHN KCP Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NHN KCP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Hynix and NHN KCP

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

The idea behind SK Hynix and NHN KCP Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .