What the ADR premium is and how it is calculated
SKHY is SK Hynix's American depositary receipt, with ten receipts representing one Korean share. This page explains how the premium is computed, why the two listings diverge, and what the number can and cannot tell you.
One receipt is not one share
A depositary receipt is a certificate that lets investors outside Korea hold a Korean share. SKHY's ratio is ten receipts per share of 000660, so putting the dollar quote for SKHY next to the won quote for the Korean line and comparing them directly means nothing. To compare, convert the Korean price into dollars at the prevailing exchange rate and then scale it by the ratio: underlying dollars per receipt equals the Korean price divided by the USD/KRW rate, times 0.1. The dashboard shows that converted figure precisely so it lines up with the SKHY quote.
The formula
Restate the receipt price on a per-share basis, then compare it with the underlying price in dollars. The gap is the premium: premium equals (ADR price / 0.1) divided by (Korean price / USD-KRW rate), minus one. A positive number means the US listing is priced above the Korean line; a negative number means the opposite. In principle arbitrageurs can compress the gap by creating and cancelling receipts, so over long horizons it oscillates around zero — but a few percent of short-term deviation is entirely normal.
Three ordinary reasons it diverges
First, the sessions barely overlap. When Korea closes at 15:30 the US market has not opened; while the US trades, Korea is shut. The premium therefore absorbs everything that happened after the Korean close, which makes it partly a forecast of the next Korean open rather than a pure pricing error. Second, the exchange rate sits in the denominator, so any move in USD/KRW shows up directly as a change in the premium. Third, liquidity differs: SKHY trades far thinner than the underlying, its spread is wider, and its quote reacts more to a single large order.
How to read it responsibly
This site estimates the premium from each market's most recent valid quote, not from a single synchronised snapshot, so do not treat it as an executable arbitrage margin. Real arbitrage also has to absorb depositary fees, taxes in both jurisdictions, borrowing costs and currency conversion. The number is more useful as a trend: a premium that keeps widening usually says offshore money is bidding more aggressively than domestic money, while a premium that collapses quickly tends to correspond to the Korean line catching up after it opens.
This page documents how this site computes the figure. It is not investment advice.