Correlation Between KB Financial and Korea Investment

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

Diversification Opportunities for KB Financial and Korea Investment

0.86

Correlation Coefficient

KB Financial  Korea Investment

Very poor diversification

The 3 months correlation between 105560 and Korea is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment 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 Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of KB Financial i.e., KB Financial and Korea Investment go up and down completely randomly.

Pair Corralation between KB Financial and Korea Investment

Assuming the 90 days trading horizon KB Financial Group is expected to generate 2.36 times more return on investment than Korea Investment. However, KB Financial is 2.36 times more volatile than Korea Investment Holdings. It trades about 0.09 of its potential returns per unit of risk. Korea Investment Holdings is currently generating about 0.08 per unit of risk. If you would invest  8,684,136  in KB Financial Group on August 31, 2024 and sell it today you would earn a total of  1,115,864  from holding KB Financial Group or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

KB Financial Group  vs.  Korea Investment Holdings

KB Financial Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 7 (%) 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.

Korea Investment Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Korea Investment

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

The idea behind KB Financial Group and Korea Investment 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.