Correlation Between Proximus and KDDI Corp

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

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

Diversification Opportunities for Proximus and KDDI Corp

-0.13

Correlation Coefficient

Proximus  KDDI Corp

Good diversification

The 3 months correlation between Proximus and KDDI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Proximus NV ADR and KDDI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDDI Corp and Proximus 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 Proximus NV ADR are associated (or correlated) with KDDI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDDI Corp has no effect on the direction of Proximus i.e., Proximus and KDDI Corp go up and down completely randomly.

Pair Corralation between Proximus and KDDI Corp

Assuming the 90 days horizon Proximus is expected to generate 14.67 times less return on investment than KDDI Corp. But when comparing it to its historical volatility, Proximus NV ADR is 12.04 times less risky than KDDI Corp. It trades about 0.16 of its potential returns per unit of risk. KDDI Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,720  in KDDI Corp on December 29, 2024 and sell it today you would lose (280.00) from holding KDDI Corp or give up 16.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Proximus NV ADR  vs.  KDDI Corp

Proximus NV ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proximus NV ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Proximus showed solid returns over the last few months and may actually be approaching a breakup point.

KDDI Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KDDI Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, KDDI Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Proximus and KDDI Corp

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

The idea behind Proximus NV ADR and KDDI 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.