Correlation Between KB Financial and Doosan Heavy

Can any of the company-specific risk be diversified away by investing in both KB Financial and Doosan Heavy 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 Doosan Heavy 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 Doosan Heavy Ind, you can compare the effects of market volatilities on KB Financial and Doosan Heavy 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 Doosan Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Doosan Heavy.

Diversification Opportunities for KB Financial and Doosan Heavy

0.8

Correlation Coefficient

KB Financial  Doosan Heavy

Very poor diversification

The 3 months correlation between 105560 and Doosan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Doosan Heavy Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Heavy Ind 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 Doosan Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Heavy Ind has no effect on the direction of KB Financial i.e., KB Financial and Doosan Heavy go up and down completely randomly.

Pair Corralation between KB Financial and Doosan Heavy

Assuming the 90 days trading horizon KB Financial is expected to generate 1.58 times less return on investment than Doosan Heavy. But when comparing it to its historical volatility, KB Financial Group is 1.13 times less risky than Doosan Heavy. It trades about 0.08 of its potential returns per unit of risk. Doosan Heavy Ind is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,765,000  in Doosan Heavy Ind on September 3, 2024 and sell it today you would earn a total of  350,000  from holding Doosan Heavy Ind or generate 19.83% return on investment over 90 days.

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

KB Financial Group  vs.  Doosan Heavy Ind

KB Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Doosan Heavy Ind

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Heavy Ind are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Doosan Heavy

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

The idea behind KB Financial Group and Doosan Heavy Ind 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.