Correlation Between Kakao Games and T3 Entertainment

Can any of the company-specific risk be diversified away by investing in both Kakao Games and T3 Entertainment 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 T3 Entertainment 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 T3 Entertainment Co, you can compare the effects of market volatilities on Kakao Games and T3 Entertainment 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 T3 Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and T3 Entertainment.

Diversification Opportunities for Kakao Games and T3 Entertainment

0.55

Correlation Coefficient

Kakao Games  T3 Entertainment

Very weak diversification

The 3 months correlation between Kakao and 204610 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and T3 Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T3 Entertainment 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 T3 Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T3 Entertainment has no effect on the direction of Kakao Games i.e., Kakao Games and T3 Entertainment go up and down completely randomly.

Pair Corralation between Kakao Games and T3 Entertainment

Assuming the 90 days trading horizon Kakao Games is expected to generate 1.17 times less return on investment than T3 Entertainment. In addition to that, Kakao Games is 1.41 times more volatile than T3 Entertainment Co. It trades about 0.08 of its total potential returns per unit of risk. T3 Entertainment Co is currently generating about 0.13 per unit of volatility. If you would invest  128,400  in T3 Entertainment Co on September 20, 2024 and sell it today you would earn a total of  26,400  from holding T3 Entertainment Co or generate 20.56% return on investment over 90 days.

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

Kakao Games Corp  vs.  T3 Entertainment Co

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.

T3 Entertainment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T3 Entertainment Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, T3 Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kakao Games and T3 Entertainment

The main advantage of trading using opposite Kakao Games and T3 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kakao Games position performs unexpectedly, T3 Entertainment 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 T3 Entertainment will offset losses from the drop in T3 Entertainment's long position.

The idea behind Kakao Games Corp and T3 Entertainment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.