Correlation Between SK Telecom and NETGEAR

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

Diversification Opportunities for SK Telecom and NETGEAR

0.34

Correlation Coefficient

SK Telecom  NETGEAR

Weak diversification

The 3 months correlation between SKM and NETGEAR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of SK Telecom i.e., SK Telecom and NETGEAR go up and down completely randomly.

Pair Corralation between SK Telecom and NETGEAR

Considering the 90-day investment horizon SK Telecom Co is expected to generate 0.46 times more return on investment than NETGEAR. However, SK Telecom Co is 2.17 times less risky than NETGEAR. It trades about 0.0 of its potential returns per unit of risk. NETGEAR is currently generating about -0.02 per unit of risk. If you would invest  2,266  in SK Telecom Co on February 13, 2024 and sell it today you would lose (133.00) from holding SK Telecom Co or give up 5.87% 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.  NETGEAR

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 very healthy forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NETGEAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SK Telecom and NETGEAR

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

The idea behind SK Telecom Co and NETGEAR 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.