Correlation Between KT and PCCW

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

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

Diversification Opportunities for KT and PCCW

-0.29

Correlation Coefficient

KT  PCCW

Very good diversification

The 3 months correlation between KT and PCCW is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited 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 PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of KT i.e., KT and PCCW go up and down completely randomly.

Pair Corralation between KT and PCCW

Allowing for the 90-day total investment horizon KT Corporation is expected to under-perform the PCCW. But the stock apears to be less risky and, when comparing its historical volatility, KT Corporation is 3.62 times less risky than PCCW. The stock trades about -0.44 of its potential returns per unit of risk. The PCCW Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  55.00  in PCCW Limited on September 28, 2024 and sell it today you would earn a total of  4.00  from holding PCCW Limited or generate 7.27% return on investment over 90 days.

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

KT Corp.  vs.  PCCW Limited

KT Corporation

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 3 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

PCCW Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PCCW Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, PCCW reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KT and PCCW

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

The idea behind KT Corporation and PCCW 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.