Correlation Between Realty Income and Kakao Games

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

By analyzing existing cross correlation between Realty Income and Kakao Games Corp, you can compare the effects of market volatilities on Realty Income and Kakao Games 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 Realty Income with a short position of Kakao Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Kakao Games.

Diversification Opportunities for Realty Income and Kakao Games

0.21

Correlation Coefficient

Realty Income  Kakao Games

Modest diversification

The 3 months correlation between Realty and Kakao is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp and Realty Income 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 Realty Income are associated (or correlated) with Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Realty Income i.e., Realty Income and Kakao Games go up and down completely randomly.

Pair Corralation between Realty Income and Kakao Games

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Kakao Games. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 2.23 times less risky than Kakao Games. The stock trades about -0.17 of its potential returns per unit of risk. The Kakao Games Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,693,000  in Kakao Games Corp on August 18, 2024 and sell it today you would lose (145,000) from holding Kakao Games Corp or give up 8.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.64%
Values	Daily Returns

Realty Income  vs.  Kakao Games Corp

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Kakao Games Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kakao Games Corp 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 Realty Income and Kakao Games

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

The idea behind Realty Income and Kakao Games Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.