Correlation Between Korea Investment and BNK Financial

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

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

Diversification Opportunities for Korea Investment and BNK Financial

0.58

Correlation Coefficient

Korea Investment  BNK Financial

Very weak diversification

The 3 months correlation between Korea and BNK is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and BNK Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Financial Group and Korea Investment 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 Korea Investment Holdings are associated (or correlated) with BNK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK Financial Group has no effect on the direction of Korea Investment i.e., Korea Investment and BNK Financial go up and down completely randomly.

Pair Corralation between Korea Investment and BNK Financial

Assuming the 90 days trading horizon Korea Investment Holdings is expected to generate 0.74 times more return on investment than BNK Financial. However, Korea Investment Holdings is 1.35 times less risky than BNK Financial. It trades about 0.19 of its potential returns per unit of risk. BNK Financial Group is currently generating about 0.07 per unit of risk. If you would invest  4,921,961  in Korea Investment Holdings on December 22, 2024 and sell it today you would earn a total of  718,039  from holding Korea Investment Holdings or generate 14.59% return on investment over 90 days.

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

Korea Investment Holdings  vs.  BNK Financial Group

Korea Investment Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

BNK Financial Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Korea Investment and BNK Financial

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

The idea behind Korea Investment Holdings and BNK 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.