Correlation Between Visa and KakaoBank Corp

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

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

Diversification Opportunities for Visa and KakaoBank Corp

0.66

Correlation Coefficient

Visa  KakaoBank Corp

Poor diversification

The 3 months correlation between Visa and KakaoBank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and KakaoBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KakaoBank Corp and Visa 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 Visa Class A are associated (or correlated) with KakaoBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KakaoBank Corp has no effect on the direction of Visa i.e., Visa and KakaoBank Corp go up and down completely randomly.

Pair Corralation between Visa and KakaoBank Corp

Taking into account the 90-day investment horizon Visa is expected to generate 1.22 times less return on investment than KakaoBank Corp. But when comparing it to its historical volatility, Visa Class A is 1.76 times less risky than KakaoBank Corp. It trades about 0.13 of its potential returns per unit of risk. KakaoBank Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,074,869  in KakaoBank Corp on December 30, 2024 and sell it today you would earn a total of  200,131  from holding KakaoBank Corp or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

Visa Class A  vs.  KakaoBank Corp

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KakaoBank Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KakaoBank Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KakaoBank Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and KakaoBank Corp

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

The idea behind Visa Class A and KakaoBank 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.