Correlation Between SK Telecom and KB Financial

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

Diversification Opportunities for SK Telecom and KB Financial

0.25

Correlation Coefficient

SK Telecom  KB Financial

Modest diversification

The 3 months correlation between SKM and KB Financial is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group 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 KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of SK Telecom i.e., SK Telecom and KB Financial go up and down completely randomly.

Pair Corralation between SK Telecom and KB Financial

Considering the 90-day investment horizon SK Telecom Co is expected to under-perform the KB Financial. But the stock apears to be less risky and, when comparing its historical volatility, SK Telecom Co is 2.06 times less risky than KB Financial. The stock trades about -0.13 of its potential returns per unit of risk. The KB Financial Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6,343  in KB Financial Group on September 23, 2024 and sell it today you would lose (435.00) from holding KB Financial Group or give up 6.86% of portfolio value over 90 days.

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

SK Telecom Co  vs.  KB Financial Group

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 weak 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.

KB Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SK Telecom and KB Financial

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

The idea behind SK Telecom Co and KB Financial Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.