Correlation Between KT and Vodacom Group

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

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

Diversification Opportunities for KT and Vodacom Group

-0.49

Correlation Coefficient

KT  Vodacom Group

Very good diversification

The 3 months correlation between KT and Vodacom is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and Vodacom Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodacom Group 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 Vodacom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodacom Group has no effect on the direction of KT i.e., KT and Vodacom Group go up and down completely randomly.

Pair Corralation between KT and Vodacom Group

Allowing for the 90-day total investment horizon KT Corporation is expected to generate 0.96 times more return on investment than Vodacom Group. However, KT Corporation is 1.04 times less risky than Vodacom Group. It trades about 0.06 of its potential returns per unit of risk. Vodacom Group Ltd is currently generating about -0.13 per unit of risk. If you would invest  1,508  in KT Corporation on September 25, 2024 and sell it today you would earn a total of  99.00  from holding KT Corporation or generate 6.56% return on investment over 90 days.

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

KT Corp.  vs.  Vodacom Group Ltd

KT Corporation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, KT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vodacom Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodacom Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KT and Vodacom Group

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

The idea behind KT Corporation and Vodacom Group Ltd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .