Correlation Between Daewoo Electronic and KT

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

By analyzing existing cross correlation between Daewoo Electronic Components and KT Corporation, you can compare the effects of market volatilities on Daewoo Electronic and KT 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 Daewoo Electronic with a short position of KT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Electronic and KT.

Diversification Opportunities for Daewoo Electronic and KT

0.56

Correlation Coefficient

Daewoo Electronic  KT

Very weak diversification

The 3 months correlation between Daewoo and KT is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Electronic Components and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation and Daewoo Electronic 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 Daewoo Electronic Components are associated (or correlated) with KT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Corporation has no effect on the direction of Daewoo Electronic i.e., Daewoo Electronic and KT go up and down completely randomly.

Pair Corralation between Daewoo Electronic and KT

Assuming the 90 days trading horizon Daewoo Electronic is expected to generate 22.11 times less return on investment than KT. But when comparing it to its historical volatility, Daewoo Electronic Components is 1.93 times less risky than KT. It trades about 0.01 of its potential returns per unit of risk. KT Corporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,522,445  in KT Corporation on December 23, 2024 and sell it today you would earn a total of  452,555  from holding KT Corporation or generate 10.01% return on investment over 90 days.

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

Daewoo Electronic Components  vs.  KT Corp.

Daewoo Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daewoo Electronic Components has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daewoo Electronic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KT Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Daewoo Electronic and KT

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

The idea behind Daewoo Electronic Components and KT Corporation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.