Correlation Between Graham Holdings and SK TELECOM

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

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

Diversification Opportunities for Graham Holdings and SK TELECOM

0.22

Correlation Coefficient

Graham Holdings  SK TELECOM

Modest diversification

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

Pair Corralation between Graham Holdings and SK TELECOM

Assuming the 90 days trading horizon Graham Holdings Co is expected to generate 0.93 times more return on investment than SK TELECOM. However, Graham Holdings Co is 1.07 times less risky than SK TELECOM. It trades about 0.21 of its potential returns per unit of risk. SK TELECOM TDADR is currently generating about 0.0 per unit of risk. If you would invest  66,837  in Graham Holdings Co on September 13, 2024 and sell it today you would earn a total of  22,663  from holding Graham Holdings Co or generate 33.91% return on investment over 90 days.

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

Graham Holdings Co  vs.  SK TELECOM TDADR

Graham Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Graham Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Graham Holdings and SK TELECOM

The main advantage of trading using opposite Graham Holdings and SK TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings 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 Graham Holdings Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.