Correlation Between Transportadora and KB Financial

Can any of the company-specific risk be diversified away by investing in both Transportadora and KB Financial 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 Transportadora and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transportadora de Gas and KB Financial Group, you can compare the effects of market volatilities on Transportadora and KB Financial 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 Transportadora with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and KB Financial.

Diversification Opportunities for Transportadora and KB Financial

0.37

Correlation Coefficient

Transportadora  KB Financial

Weak diversification

The 3 months correlation between Transportadora and KBIA is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group and Transportadora 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 Transportadora de Gas are associated (or correlated) with KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Transportadora i.e., Transportadora and KB Financial go up and down completely randomly.

Pair Corralation between Transportadora and KB Financial

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.45 times more return on investment than KB Financial. However, Transportadora is 1.45 times more volatile than KB Financial Group. It trades about 0.16 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.02 per unit of risk. If you would invest  1,850  in Transportadora de Gas on September 20, 2024 and sell it today you would earn a total of  930.00  from holding Transportadora de Gas or generate 50.27% return on investment over 90 days.

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

Transportadora de Gas  vs.  KB Financial Group

Transportadora de Gas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

KB Financial Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Transportadora and KB Financial

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

The idea behind Transportadora de Gas and KB Financial Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.