Correlation Between Kakao Games and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Kakao Games and Dow Jones 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 Kakao Games and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kakao Games Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Kakao Games and Dow Jones 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 Kakao Games with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and Dow Jones.
Diversification Opportunities for Kakao Games and Dow Jones
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kakao and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Kakao Games 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 Kakao Games Corp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Kakao Games i.e., Kakao Games and Dow Jones go up and down completely randomly.
Pair Corralation between Kakao Games and Dow Jones
Assuming the 90 days trading horizon Kakao Games Corp is expected to under-perform the Dow Jones. In addition to that, Kakao Games is 1.01 times more volatile than Dow Jones Industrial. It trades about -0.24 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.12 per unit of volatility. If you would invest 4,195,332 in Dow Jones Industrial on January 19, 2025 and sell it today you would lose (281,109) from holding Dow Jones Industrial or give up 6.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kakao Games Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Kakao Games and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Kakao Games Corp
Pair trading matchups for Kakao Games
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Kakao Games and Dow Jones
The main advantage of trading using opposite Kakao Games and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kakao Games position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Kakao Games vs. Duksan Hi Metal | Kakao Games vs. Seoul Broadcasting System | Kakao Games vs. Homecast CoLtd | Kakao Games vs. PJ Metal Co |
| Dow Jones vs. Emerson Electric | Dow Jones vs. Ambipar Emergency Response | Dow Jones vs. ChampionX | Dow Jones vs. Primoris Services |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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