Correlation Between KT and China TowerLimited
Can any of the company-specific risk be diversified away by investing in both KT and China TowerLimited 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 KT and China TowerLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KT Corporation and China Tower, you can compare the effects of market volatilities on KT and China TowerLimited 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 KT with a short position of China TowerLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT and China TowerLimited.
Diversification Opportunities for KT and China TowerLimited
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KT and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China TowerLimited and KT 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 KT Corporation are associated (or correlated) with China TowerLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China TowerLimited has no effect on the direction of KT i.e., KT and China TowerLimited go up and down completely randomly.
Pair Corralation between KT and China TowerLimited
Allowing for the 90-day total investment horizon KT Corporation is expected to generate 0.79 times more return on investment than China TowerLimited. However, KT Corporation is 1.27 times less risky than China TowerLimited. It trades about 0.28 of its potential returns per unit of risk. China Tower is currently generating about 0.02 per unit of risk. If you would invest 1,566 in KT Corporation on August 30, 2024 and sell it today you would earn a total of 263.00 from holding KT Corporation or generate 16.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KT Corp. vs. China Tower
Performance |
| Timeline |
| KT Corporation |
| China TowerLimited |
KT and China TowerLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KT and China TowerLimited
The main advantage of trading using opposite KT and China TowerLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT position performs unexpectedly, China TowerLimited 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 China TowerLimited will offset losses from the drop in China TowerLimited's long position.The idea behind KT Corporation and China Tower 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.| China TowerLimited vs. Singapore Telecommunications Limited | China TowerLimited vs. Vodafone Group PLC | China TowerLimited vs. PT Indosat Tbk | China TowerLimited vs. KDDI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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