Correlation Between Ribbon Communications and KT

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

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

Diversification Opportunities for Ribbon Communications and KT

0.04

Correlation Coefficient

Ribbon Communications  KT

Significant diversification

The 3 months correlation between Ribbon and KT is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation and Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications i.e., Ribbon Communications and KT go up and down completely randomly.

Pair Corralation between Ribbon Communications and KT

Given the investment horizon of 90 days Ribbon Communications is expected to generate 2.35 times more return on investment than KT. However, Ribbon Communications is 2.35 times more volatile than KT Corporation. It trades about 0.13 of its potential returns per unit of risk. KT Corporation is currently generating about -0.03 per unit of risk. If you would invest  391.00  in Ribbon Communications on November 28, 2024 and sell it today you would earn a total of  93.00  from holding Ribbon Communications or generate 23.79% return on investment over 90 days.

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

Ribbon Communications  vs.  KT Corp.

Ribbon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, Ribbon Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

KT Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days KT Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Ribbon Communications and KT

The main advantage of trading using opposite Ribbon Communications and KT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications 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 Ribbon Communications 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.