Correlation Between Total Soft and KakaoBank Corp

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

By analyzing existing cross correlation between Total Soft Bank and KakaoBank Corp, you can compare the effects of market volatilities on Total Soft and KakaoBank Corp 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 Total Soft with a short position of KakaoBank Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and KakaoBank Corp.

Diversification Opportunities for Total Soft and KakaoBank Corp

0.23

Correlation Coefficient

Total Soft  KakaoBank Corp

Modest diversification

The 3 months correlation between Total and KakaoBank is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and KakaoBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KakaoBank Corp and Total Soft 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 Total Soft Bank are associated (or correlated) with KakaoBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KakaoBank Corp has no effect on the direction of Total Soft i.e., Total Soft and KakaoBank Corp go up and down completely randomly.

Pair Corralation between Total Soft and KakaoBank Corp

Assuming the 90 days trading horizon Total Soft is expected to generate 1.27 times less return on investment than KakaoBank Corp. In addition to that, Total Soft is 2.36 times more volatile than KakaoBank Corp. It trades about 0.04 of its total potential returns per unit of risk. KakaoBank Corp is currently generating about 0.13 per unit of volatility. If you would invest  2,030,000  in KakaoBank Corp on September 4, 2024 and sell it today you would earn a total of  305,000  from holding KakaoBank Corp or generate 15.02% return on investment over 90 days.

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

Total Soft Bank  vs.  KakaoBank Corp

Total Soft Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

KakaoBank Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KakaoBank Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KakaoBank Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Total Soft and KakaoBank Corp

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

The idea behind Total Soft Bank and KakaoBank Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.