Correlation Between COFACE SA and SK TELECOM

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

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

Diversification Opportunities for COFACE SA and SK TELECOM

-0.22

Correlation Coefficient

COFACE SA  SK TELECOM

Very good diversification

The 3 months correlation between COFACE and KMBA is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding COFACE SA 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 COFACE SA 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 COFACE SA 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 COFACE SA i.e., COFACE SA and SK TELECOM go up and down completely randomly.

Pair Corralation between COFACE SA and SK TELECOM

Assuming the 90 days horizon COFACE SA is expected to generate 5.89 times less return on investment than SK TELECOM. But when comparing it to its historical volatility, COFACE SA is 1.73 times less risky than SK TELECOM. It trades about 0.02 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,060  in SK TELECOM TDADR on September 5, 2024 and sell it today you would earn a total of  200.00  from holding SK TELECOM TDADR or generate 9.71% return on investment over 90 days.

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

COFACE SA  vs.  SK TELECOM TDADR

COFACE SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COFACE SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COFACE SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SK TELECOM TDADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SK TELECOM TDADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, SK TELECOM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COFACE SA and SK TELECOM

The main advantage of trading using opposite COFACE SA and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COFACE SA 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 COFACE SA 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.