Correlation Between KT Submarine and Lake Materials

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

By analyzing existing cross correlation between KT Submarine Telecom and Lake Materials Co, you can compare the effects of market volatilities on KT Submarine and Lake Materials 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 Submarine with a short position of Lake Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT Submarine and Lake Materials.

Diversification Opportunities for KT Submarine and Lake Materials

0.42

Correlation Coefficient

KT Submarine  Lake Materials

Very weak diversification

The 3 months correlation between 060370 and Lake is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding KT Submarine Telecom and Lake Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Materials and KT Submarine 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 Submarine Telecom are associated (or correlated) with Lake Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Materials has no effect on the direction of KT Submarine i.e., KT Submarine and Lake Materials go up and down completely randomly.

Pair Corralation between KT Submarine and Lake Materials

Assuming the 90 days trading horizon KT Submarine is expected to generate 9.73 times less return on investment than Lake Materials. But when comparing it to its historical volatility, KT Submarine Telecom is 1.66 times less risky than Lake Materials. It trades about 0.02 of its potential returns per unit of risk. Lake Materials Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,096,000  in Lake Materials Co on December 30, 2024 and sell it today you would earn a total of  404,000  from holding Lake Materials Co or generate 36.86% return on investment over 90 days.

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

KT Submarine Telecom  vs.  Lake Materials Co

KT Submarine Telecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KT Submarine Telecom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KT Submarine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lake Materials

Risk-Adjusted Performance

OK

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

Pair Trading with KT Submarine and Lake Materials

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

The idea behind KT Submarine Telecom and Lake Materials Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.