Correlation Between KT and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both KT and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KT Corporation and Verizon Communications, you can compare the effects of market volatilities on KT and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT and Verizon Communications.
Diversification Opportunities for KT and Verizon Communications
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between KT and Verizon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of KT i.e., KT and Verizon Communications go up and down completely randomly.
Pair Corralation between KT and Verizon Communications
Allowing for the 90-day total investment horizon KT Corporation is expected to generate 2.04 times more return on investment than Verizon Communications. However, KT is 2.04 times more volatile than Verizon Communications. It trades about 0.1 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.03 per unit of risk. If you would invest 1,555 in KT Corporation on August 24, 2024 and sell it today you would earn a total of 79.00 from holding KT Corporation or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KT Corp. vs. Verizon Communications
Performance |
| Timeline |
| KT Corporation |
| Verizon Communications |
KT and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KT and Verizon Communications
The main advantage of trading using opposite KT and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.The idea behind KT Corporation and Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Comcast Corp | Verizon Communications vs. ATT Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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