Correlation Between Dong A and KB Financial

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

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

Diversification Opportunities for Dong A and KB Financial

0.68

Correlation Coefficient

Dong A  KB Financial

Poor diversification

The 3 months correlation between Dong and 105560 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology 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 Dong A 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 Dong A Steel Technology 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 Dong A i.e., Dong A and KB Financial go up and down completely randomly.

Pair Corralation between Dong A and KB Financial

Assuming the 90 days trading horizon Dong A Steel Technology is expected to under-perform the KB Financial. In addition to that, Dong A is 1.19 times more volatile than KB Financial Group. It trades about -0.09 of its total potential returns per unit of risk. KB Financial Group is currently generating about -0.02 per unit of volatility. If you would invest  9,150,000  in KB Financial Group on October 17, 2024 and sell it today you would lose (270,000) from holding KB Financial Group or give up 2.95% of portfolio value over 90 days.

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

Dong A Steel Technology  vs.  KB Financial Group

Dong A Steel

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 basic indicators, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dong A and KB Financial

The main advantage of trading using opposite Dong A and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A 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 Dong A Steel Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .