Correlation Between Vodafone Group and KT

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

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

Diversification Opportunities for Vodafone Group and KT

0.05

Correlation Coefficient

Vodafone Group  KT

Significant diversification

The 3 months correlation between Vodafone and KT is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation and Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and KT go up and down completely randomly.

Pair Corralation between Vodafone Group and KT

Assuming the 90 days horizon Vodafone Group PLC is expected to generate 2.74 times more return on investment than KT. However, Vodafone Group is 2.74 times more volatile than KT Corporation. It trades about 0.07 of its potential returns per unit of risk. KT Corporation is currently generating about 0.16 per unit of risk. If you would invest  84.00  in Vodafone Group PLC on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Vodafone Group PLC or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Vodafone Group PLC  vs.  KT Corp.

Vodafone Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vodafone Group reported solid returns over the last few months and may actually be approaching a breakup point.

KT Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, KT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vodafone Group and KT

The main advantage of trading using opposite Vodafone Group and KT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.