Correlation Between Telefonica Brasil and SK Telecom

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

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

Diversification Opportunities for Telefonica Brasil and SK Telecom

0.7

Correlation Coefficient

Telefonica Brasil  SK Telecom

Poor diversification

The 3 months correlation between Telefonica and SKM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom and Telefonica Brasil 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 Telefonica Brasil 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 has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and SK Telecom go up and down completely randomly.

Pair Corralation between Telefonica Brasil and SK Telecom

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the SK Telecom. In addition to that, Telefonica Brasil is 1.3 times more volatile than SK Telecom Co. It trades about -0.13 of its total potential returns per unit of risk. SK Telecom Co is currently generating about 0.06 per unit of volatility. If you would invest  2,329  in SK Telecom Co on August 31, 2024 and sell it today you would earn a total of  95.00  from holding SK Telecom Co or generate 4.08% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  SK Telecom Co

Telefonica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

SK Telecom

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, SK Telecom is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Telefonica Brasil and SK Telecom

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

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.