Correlation Between Lumia and Kakao Games

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

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

Diversification Opportunities for Lumia and Kakao Games

-0.38

Correlation Coefficient

Lumia  Kakao Games

Very good diversification

The 3 months correlation between Lumia and Kakao is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp and Lumia 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 Lumia are associated (or correlated) with Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Lumia i.e., Lumia and Kakao Games go up and down completely randomly.

Pair Corralation between Lumia and Kakao Games

Assuming the 90 days trading horizon Lumia is expected to under-perform the Kakao Games. In addition to that, Lumia is 4.34 times more volatile than Kakao Games Corp. It trades about -0.18 of its total potential returns per unit of risk. Kakao Games Corp is currently generating about -0.12 per unit of volatility. If you would invest  1,784,000  in Kakao Games Corp on December 23, 2024 and sell it today you would lose (216,000) from holding Kakao Games Corp or give up 12.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.23%
Values	Daily Returns

Lumia  vs.  Kakao Games Corp

Lumia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Lumia shareholders.

Kakao Games Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kakao Games Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lumia and Kakao Games

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

The idea behind Lumia and Kakao Games Corp 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.