Correlation Between KT and Telefonica Brasil

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

By analyzing existing cross correlation between KT Corporation and Telefonica Brasil SA, you can compare the effects of market volatilities on KT and Telefonica Brasil 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 Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT and Telefonica Brasil.

Diversification Opportunities for KT and Telefonica Brasil

0.68

Correlation Coefficient

KT  Telefonica Brasil

Poor diversification

The 3 months correlation between KT and Telefonica is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil 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 Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of KT i.e., KT and Telefonica Brasil go up and down completely randomly.

Pair Corralation between KT and Telefonica Brasil

Allowing for the 90-day total investment horizon KT Corporation is expected to generate 0.43 times more return on investment than Telefonica Brasil. However, KT Corporation is 2.32 times less risky than Telefonica Brasil. It trades about 0.39 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about -0.12 per unit of risk. If you would invest  1,254  in KT Corporation on February 22, 2024 and sell it today you would earn a total of  100.00  from holding KT Corporation or generate 7.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

KT Corp.  vs.  Telefonica Brasil SA

KT Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KT Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, KT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Telefonica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with KT and Telefonica Brasil

The main advantage of trading using opposite KT and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT position performs unexpectedly, Telefonica Brasil 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 Telefonica Brasil will offset losses from the drop in Telefonica Brasil's long position.

The idea behind KT Corporation and Telefonica Brasil SA 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.