Correlation Between DB Financial and Kia Corp

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

By analyzing existing cross correlation between DB Financial Investment and Kia Corp, you can compare the effects of market volatilities on DB Financial and Kia Corp 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 DB Financial with a short position of Kia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Kia Corp.

Diversification Opportunities for DB Financial and Kia Corp

0.36

Correlation Coefficient

DB Financial  Kia Corp

Weak diversification

The 3 months correlation between 016610 and Kia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Kia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kia Corp and DB 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 DB Financial Investment are associated (or correlated) with Kia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kia Corp has no effect on the direction of DB Financial i.e., DB Financial and Kia Corp go up and down completely randomly.

Pair Corralation between DB Financial and Kia Corp

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the Kia Corp. But the stock apears to be less risky and, when comparing its historical volatility, DB Financial Investment is 1.22 times less risky than Kia Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Kia Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,500,000  in Kia Corp on October 7, 2024 and sell it today you would earn a total of  570,000  from holding Kia Corp or generate 6.0% return on investment over 90 days.

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

DB Financial Investment  vs.  Kia Corp

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kia Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Kia Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kia Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DB Financial and Kia Corp

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

The idea behind DB Financial Investment and Kia Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.