Correlation Between KB Financial and JAPAN EX

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

Diversification Opportunities for KB Financial and JAPAN EX

-0.42

Correlation Coefficient

KB Financial  JAPAN EX

Very good diversification

The 3 months correlation between KBIA and JAPAN is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and JAPAN EX UNADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN EX UNADR 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 JAPAN EX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN EX UNADR has no effect on the direction of KB Financial i.e., KB Financial and JAPAN EX go up and down completely randomly.

Pair Corralation between KB Financial and JAPAN EX

Assuming the 90 days trading horizon KB Financial Group is expected to generate 1.64 times more return on investment than JAPAN EX. However, KB Financial is 1.64 times more volatile than JAPAN EX UNADR. It trades about 0.06 of its potential returns per unit of risk. JAPAN EX UNADR is currently generating about -0.04 per unit of risk. If you would invest  5,193  in KB Financial Group on September 25, 2024 and sell it today you would earn a total of  457.00  from holding KB Financial Group or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

KB Financial Group  vs.  JAPAN EX UNADR

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 nearly fragile forward indicators, KB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JAPAN EX UNADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN EX UNADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, JAPAN EX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KB Financial and JAPAN EX

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

The idea behind KB Financial Group and JAPAN EX UNADR 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 Anywhere module to track or share privately all of your investments from the convenience of any device.