Correlation Between SK TELECOM and AUTO TRADER

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

By analyzing existing cross correlation between SK TELECOM TDADR and AUTO TRADER ADR, you can compare the effects of market volatilities on SK TELECOM and AUTO TRADER 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 AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK TELECOM and AUTO TRADER.

Diversification Opportunities for SK TELECOM and AUTO TRADER

-0.5

Correlation Coefficient

SK TELECOM  AUTO TRADER

Very good diversification

The 3 months correlation between KMBA and AUTO is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SK TELECOM TDADR and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR 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 TDADR are associated (or correlated) with AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of SK TELECOM i.e., SK TELECOM and AUTO TRADER go up and down completely randomly.

Pair Corralation between SK TELECOM and AUTO TRADER

Assuming the 90 days trading horizon SK TELECOM TDADR is expected to under-perform the AUTO TRADER. In addition to that, SK TELECOM is 1.21 times more volatile than AUTO TRADER ADR. It trades about -0.01 of its total potential returns per unit of risk. AUTO TRADER ADR is currently generating about 0.0 per unit of volatility. If you would invest  220.00  in AUTO TRADER ADR on April 23, 2025 and sell it today you would lose (2.00) from holding AUTO TRADER ADR or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

SK TELECOM TDADR  vs.  AUTO TRADER ADR

SK TELECOM TDADR

Risk-Adjusted Performance

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

AUTO TRADER ADR

Risk-Adjusted Performance

Insignificant

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AUTO TRADER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SK TELECOM and AUTO TRADER

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

The idea behind SK TELECOM TDADR and AUTO TRADER ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.