Correlation Between Kakao Games and Coloray International

Can any of the company-specific risk be diversified away by investing in both Kakao Games and Coloray International 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 Coloray International 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 Coloray International Investment, you can compare the effects of market volatilities on Kakao Games and Coloray International 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 Coloray International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and Coloray International.

Diversification Opportunities for Kakao Games and Coloray International

0.35

Correlation Coefficient

Kakao Games  Coloray International

Weak diversification

The 3 months correlation between Kakao and Coloray is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and Coloray International Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloray International 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 Coloray International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloray International has no effect on the direction of Kakao Games i.e., Kakao Games and Coloray International go up and down completely randomly.

Pair Corralation between Kakao Games and Coloray International

Assuming the 90 days trading horizon Kakao Games Corp is expected to generate 0.75 times more return on investment than Coloray International. However, Kakao Games Corp is 1.33 times less risky than Coloray International. It trades about 0.03 of its potential returns per unit of risk. Coloray International Investment is currently generating about -0.04 per unit of risk. If you would invest  1,769,000  in Kakao Games Corp on September 3, 2024 and sell it today you would earn a total of  46,000  from holding Kakao Games Corp or generate 2.6% return on investment over 90 days.

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

Kakao Games Corp  vs.  Coloray International Investme

Kakao Games Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kakao Games Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kakao Games is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coloray International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloray International Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kakao Games and Coloray International

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

The idea behind Kakao Games Corp and Coloray International Investment 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.