Correlation Between KakaoBank Corp and Total Soft

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

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

Diversification Opportunities for KakaoBank Corp and Total Soft

-0.18

Correlation Coefficient

KakaoBank Corp  Total Soft

Good diversification

The 3 months correlation between KakaoBank and Total is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding KakaoBank Corp and Total Soft Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Soft Bank and KakaoBank Corp 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 KakaoBank Corp are associated (or correlated) with Total Soft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Soft Bank has no effect on the direction of KakaoBank Corp i.e., KakaoBank Corp and Total Soft go up and down completely randomly.

Pair Corralation between KakaoBank Corp and Total Soft

Assuming the 90 days trading horizon KakaoBank Corp is expected to generate 0.39 times more return on investment than Total Soft. However, KakaoBank Corp is 2.58 times less risky than Total Soft. It trades about 0.09 of its potential returns per unit of risk. Total Soft Bank is currently generating about -0.02 per unit of risk. If you would invest  2,074,869  in KakaoBank Corp on December 30, 2024 and sell it today you would earn a total of  200,131  from holding KakaoBank Corp or generate 9.65% return on investment over 90 days.

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

KakaoBank Corp  vs.  Total Soft Bank

KakaoBank Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KakaoBank Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KakaoBank Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Total Soft Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Total Soft Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KakaoBank Corp and Total Soft

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

The idea behind KakaoBank Corp and Total Soft Bank 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.