Correlation Between Kakao Games and Dong A

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

By analyzing existing cross correlation between Kakao Games Corp and Dong A Eltek, you can compare the effects of market volatilities on Kakao Games and Dong A 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 Kakao Games with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and Dong A.

Diversification Opportunities for Kakao Games and Dong A

-0.32

Correlation Coefficient

Kakao Games  Dong A

Very good diversification

The 3 months correlation between Kakao and Dong is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek and Kakao Games 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 Kakao Games Corp are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Kakao Games i.e., Kakao Games and Dong A go up and down completely randomly.

Pair Corralation between Kakao Games and Dong A

Assuming the 90 days trading horizon Kakao Games is expected to generate 3.8 times less return on investment than Dong A. But when comparing it to its historical volatility, Kakao Games Corp is 1.34 times less risky than Dong A. It trades about 0.0 of its potential returns per unit of risk. Dong A Eltek is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  444,500  in Dong A Eltek on September 20, 2024 and sell it today you would lose (40,500) from holding Dong A Eltek or give up 9.11% of portfolio value over 90 days.

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

Kakao Games Corp  vs.  Dong A Eltek

Kakao Games Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kakao Games Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kakao Games sustained solid returns over the last few months and may actually be approaching a breakup point.

Dong A Eltek

Risk-Adjusted Performance

1 of 100

Insignificant

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

Pair Trading with Kakao Games and Dong A

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

The idea behind Kakao Games Corp and Dong A Eltek 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.