Correlation Between KT and Company K
Can any of the company-specific risk be diversified away by investing in both KT and Company K 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 KT and Company K into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KT Corporation and Company K Partners, you can compare the effects of market volatilities on KT and Company K 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 KT with a short position of Company K. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT and Company K.
Diversification Opportunities for KT and Company K
Very good diversification
The 3 months correlation between KT and Company is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners and KT 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 KT Corporation are associated (or correlated) with Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of KT i.e., KT and Company K go up and down completely randomly.
Pair Corralation between KT and Company K
Assuming the 90 days trading horizon KT Corporation is expected to generate 0.46 times more return on investment than Company K. However, KT Corporation is 2.15 times less risky than Company K. It trades about 0.1 of its potential returns per unit of risk. Company K Partners is currently generating about -0.02 per unit of risk. If you would invest 3,556,627 in KT Corporation on October 4, 2024 and sell it today you would earn a total of 828,373 from holding KT Corporation or generate 23.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
KT Corp. vs. Company K Partners
Performance |
Timeline |
KT Corporation |
Company K Partners |
KT and Company K Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KT and Company K
The main advantage of trading using opposite KT and Company K positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT position performs unexpectedly, Company K 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 Company K will offset losses from the drop in Company K's long position.KT vs. Hanjoo Light Metal | KT vs. Eagon Industrial Co | KT vs. Cheryong Industrial CoLtd | KT vs. Hyunwoo Industrial Co |
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Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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