Correlation Between KB Financial and Home Center

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

Diversification Opportunities for KB Financial and Home Center

-0.81

Correlation Coefficient

KB Financial  Home Center

Pay attention - limited upside

The 3 months correlation between 105560 and Home is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings 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 Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of KB Financial i.e., KB Financial and Home Center go up and down completely randomly.

Pair Corralation between KB Financial and Home Center

Assuming the 90 days trading horizon KB Financial Group is expected to generate 0.89 times more return on investment than Home Center. However, KB Financial Group is 1.12 times less risky than Home Center. It trades about 0.08 of its potential returns per unit of risk. Home Center Holdings is currently generating about -0.14 per unit of risk. If you would invest  8,684,136  in KB Financial Group on September 1, 2024 and sell it today you would earn a total of  935,864  from holding KB Financial Group or generate 10.78% return on investment over 90 days.

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

KB Financial Group  vs.  Home Center Holdings

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.

Home Center Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KB Financial and Home Center

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

The idea behind KB Financial Group and Home Center Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.