Correlation Between KDDI Corp and Singapore Telecommunicatio

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

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

Diversification Opportunities for KDDI Corp and Singapore Telecommunicatio

-0.13

Correlation Coefficient

KDDI Corp  Singapore Telecommunicatio

Good diversification

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

Pair Corralation between KDDI Corp and Singapore Telecommunicatio

Assuming the 90 days horizon KDDI Corp is expected to generate 18.97 times more return on investment than Singapore Telecommunicatio. However, KDDI Corp is 18.97 times more volatile than Singapore Telecommunications Limited. It trades about 0.19 of its potential returns per unit of risk. Singapore Telecommunications Limited is currently generating about 0.09 per unit of risk. If you would invest  1,720  in KDDI Corp on December 30, 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	90.16%
Values	Daily Returns

KDDI Corp  vs.  Singapore Telecommunications L

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 fragile forward indicators, KDDI Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Telecommunications Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Singapore Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KDDI Corp and Singapore Telecommunicatio

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

The idea behind KDDI Corp and Singapore Telecommunications Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.