Correlation Between KT and Orange SA

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

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

Diversification Opportunities for KT and Orange SA

-0.39

Correlation Coefficient

KT  Orange SA

Very good diversification

The 3 months correlation between KT and Orange is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding KT Corp. and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA ADR has no effect on the direction of KT i.e., KT and Orange SA go up and down completely randomly.

Pair Corralation between KT and Orange SA

Allowing for the 90-day total investment horizon KT Corporation is expected to generate 2.49 times more return on investment than Orange SA. However, KT is 2.49 times more volatile than Orange SA ADR. It trades about 0.26 of its potential returns per unit of risk. Orange SA ADR is currently generating about -0.03 per unit of risk. If you would invest  1,581  in KT Corporation on August 31, 2024 and sell it today you would earn a total of  248.00  from holding KT Corporation or generate 15.69% return on investment over 90 days.

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

KT Corp.  vs.  Orange SA ADR

KT Corporation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, KT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with KT and Orange SA

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

The idea behind KT Corporation and Orange SA ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.