Correlation Between Telenor ASA and KT

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

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

Diversification Opportunities for Telenor ASA and KT

-0.48

Correlation Coefficient

Telenor ASA  KT

Very good diversification

The 3 months correlation between Telenor and KT is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation and Telenor ASA 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 Telenor ASA ADR 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 Telenor ASA i.e., Telenor ASA and KT go up and down completely randomly.

Pair Corralation between Telenor ASA and KT

Assuming the 90 days horizon Telenor ASA ADR is expected to under-perform the KT. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telenor ASA ADR is 1.63 times less risky than KT. The pink sheet trades about -0.31 of its potential returns per unit of risk. The KT Corporation is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,696  in KT Corporation on September 25, 2024 and sell it today you would lose (89.00) from holding KT Corporation or give up 5.25% of portfolio value over 90 days.

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

Telenor ASA ADR  vs.  KT Corp.

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic 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.

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.

Pair Trading with Telenor ASA and KT

The main advantage of trading using opposite Telenor ASA and KT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA 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 Telenor ASA ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.