Correlation Between KB Financial and Korea Shipbuilding

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

By analyzing existing cross correlation between KB Financial Group and Korea Shipbuilding Offshore, you can compare the effects of market volatilities on KB Financial and Korea Shipbuilding 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 KB Financial with a short position of Korea Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Korea Shipbuilding.

Diversification Opportunities for KB Financial and Korea Shipbuilding

0.52

Correlation Coefficient

KB Financial  Korea Shipbuilding

Very weak diversification

The 3 months correlation between 105560 and Korea is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Korea Shipbuilding Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Shipbuilding and KB Financial 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 KB Financial Group are associated (or correlated) with Korea Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Shipbuilding has no effect on the direction of KB Financial i.e., KB Financial and Korea Shipbuilding go up and down completely randomly.

Pair Corralation between KB Financial and Korea Shipbuilding

Assuming the 90 days trading horizon KB Financial is expected to generate 1.3 times less return on investment than Korea Shipbuilding. In addition to that, KB Financial is 1.1 times more volatile than Korea Shipbuilding Offshore. It trades about 0.05 of its total potential returns per unit of risk. Korea Shipbuilding Offshore is currently generating about 0.07 per unit of volatility. If you would invest  19,100,000  in Korea Shipbuilding Offshore on September 14, 2024 and sell it today you would earn a total of  1,900,000  from holding Korea Shipbuilding Offshore or generate 9.95% return on investment over 90 days.

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

KB Financial Group  vs.  Korea Shipbuilding Offshore

KB Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Korea Shipbuilding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Shipbuilding Offshore are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Shipbuilding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Korea Shipbuilding

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

The idea behind KB Financial Group and Korea Shipbuilding Offshore 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..