Correlation Between KT and IDT

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

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

Diversification Opportunities for KT and IDT

0.54

Correlation Coefficient

KT  IDT

Very weak diversification

The 3 months correlation between KT and IDT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and IDT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDT Corporation 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 IDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDT Corporation has no effect on the direction of KT i.e., KT and IDT go up and down completely randomly.

Pair Corralation between KT and IDT

Allowing for the 90-day total investment horizon KT is expected to generate 1.61 times less return on investment than IDT. But when comparing it to its historical volatility, KT Corporation is 1.37 times less risky than IDT. It trades about 0.09 of its potential returns per unit of risk. IDT Corporation is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,583  in IDT Corporation on September 29, 2024 and sell it today you would earn a total of  1,210  from holding IDT Corporation or generate 33.77% 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.  IDT Corp.

KT Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, KT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

IDT Corporation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, IDT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KT and IDT

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

The idea behind KT Corporation and IDT Corporation 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.