Correlation Between KB Financial and VersaBank

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

Diversification Opportunities for KB Financial and VersaBank

0.4

Correlation Coefficient

KB Financial  VersaBank

Very weak diversification

The 3 months correlation between KB Financial and VersaBank is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank 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 VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of KB Financial i.e., KB Financial and VersaBank go up and down completely randomly.

Pair Corralation between KB Financial and VersaBank

Allowing for the 90-day total investment horizon KB Financial is expected to generate 1.38 times less return on investment than VersaBank. In addition to that, KB Financial is 1.05 times more volatile than VersaBank. It trades about 0.06 of its total potential returns per unit of risk. VersaBank is currently generating about 0.09 per unit of volatility. If you would invest  755.00  in VersaBank on September 14, 2024 and sell it today you would earn a total of  875.00  from holding VersaBank or generate 115.89% 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.  VersaBank

KB Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

VersaBank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and VersaBank

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

The idea behind KB Financial Group and VersaBank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.