Correlation Between Raontech and Kakao Games
Can any of the company-specific risk be diversified away by investing in both Raontech and Kakao Games 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 Raontech and Kakao Games into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raontech and Kakao Games Corp, you can compare the effects of market volatilities on Raontech and Kakao Games 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 Raontech with a short position of Kakao Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raontech and Kakao Games.
Diversification Opportunities for Raontech and Kakao Games
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Raontech and Kakao is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Raontech and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp and Raontech 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 Raontech are associated (or correlated) with Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Raontech i.e., Raontech and Kakao Games go up and down completely randomly.
Pair Corralation between Raontech and Kakao Games
Assuming the 90 days trading horizon Raontech is expected to under-perform the Kakao Games. In addition to that, Raontech is 1.7 times more volatile than Kakao Games Corp. It trades about -0.34 of its total potential returns per unit of risk. Kakao Games Corp is currently generating about -0.07 per unit of volatility. If you would invest 1,664,000 in Kakao Games Corp on November 4, 2024 and sell it today you would lose (41,000) from holding Kakao Games Corp or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raontech vs. Kakao Games Corp
Performance |
| Timeline |
| Raontech |
| Kakao Games Corp |
Raontech and Kakao Games Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raontech and Kakao Games
The main advantage of trading using opposite Raontech and Kakao Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raontech position performs unexpectedly, Kakao Games 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 Kakao Games will offset losses from the drop in Kakao Games' long position.| Raontech vs. Choil Aluminum | Raontech vs. Heungkuk Metaltech CoLtd | Raontech vs. Sewoon Medical Co | Raontech vs. Daejung Chemicals Metals |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Kakao Games as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Kakao Games' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Kakao Games' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Kakao Games Corp.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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