Correlation Between KB Financial and ICICI Bank

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

Diversification Opportunities for KB Financial and ICICI Bank

0.12

Correlation Coefficient

KB Financial  ICICI Bank

Average diversification

The 3 months correlation between KB Financial and ICICI is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited 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 ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of KB Financial i.e., KB Financial and ICICI Bank go up and down completely randomly.

Pair Corralation between KB Financial and ICICI Bank

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 1.66 times more return on investment than ICICI Bank. However, KB Financial is 1.66 times more volatile than ICICI Bank Limited. It trades about 0.06 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about 0.04 per unit of risk. If you would invest  6,367  in KB Financial Group on September 3, 2024 and sell it today you would earn a total of  526.00  from holding KB Financial Group or generate 8.26% return on investment over 90 days.

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

KB Financial Group  vs.  ICICI Bank Limited

KB Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ICICI Bank Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICICI Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, ICICI Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and ICICI Bank

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

The idea behind KB Financial Group and ICICI Bank Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.