Correlation Between KT and InterDigital

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

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

Diversification Opportunities for KT and InterDigital

0.47

Correlation Coefficient

KT  InterDigital

Very weak diversification

The 3 months correlation between KT and InterDigital is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and InterDigital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterDigital and KT 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 KT Corporation are associated (or correlated) with InterDigital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterDigital has no effect on the direction of KT i.e., KT and InterDigital go up and down completely randomly.

Pair Corralation between KT and InterDigital

Allowing for the 90-day total investment horizon KT Corporation is expected to generate 0.47 times more return on investment than InterDigital. However, KT Corporation is 2.13 times less risky than InterDigital. It trades about 0.16 of its potential returns per unit of risk. InterDigital is currently generating about 0.07 per unit of risk. If you would invest  1,562  in KT Corporation on December 29, 2024 and sell it today you would earn a total of  202.00  from holding KT Corporation or generate 12.93% return on investment over 90 days.

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

KT Corp.  vs.  InterDigital

KT Corporation

Risk-Adjusted Performance

Good

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

InterDigital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KT and InterDigital

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

The idea behind KT Corporation and InterDigital 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.