Correlation Between PCCW and KT

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

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

Diversification Opportunities for PCCW and KT

-0.29

Correlation Coefficient

PCCW  KT

Very good diversification

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

Pair Corralation between PCCW and KT

Assuming the 90 days horizon PCCW Limited is expected to generate 2.17 times more return on investment than KT. However, PCCW is 2.17 times more volatile than KT Corporation. It trades about 0.05 of its potential returns per unit of risk. KT Corporation is currently generating about 0.04 per unit of risk. 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

PCCW Limited  vs.  KT Corp.

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.

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.

Pair Trading with PCCW and KT

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

The idea behind PCCW Limited and KT 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.