Correlation Between KB Financial and Kukdong Oil

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

Diversification Opportunities for KB Financial and Kukdong Oil

0.43

Correlation Coefficient

KB Financial  Kukdong Oil

Very weak diversification

The 3 months correlation between 105560 and Kukdong is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Kukdong Oil Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdong Oil Chemicals 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 Kukdong Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdong Oil Chemicals has no effect on the direction of KB Financial i.e., KB Financial and Kukdong Oil go up and down completely randomly.

Pair Corralation between KB Financial and Kukdong Oil

Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the Kukdong Oil. In addition to that, KB Financial is 2.4 times more volatile than Kukdong Oil Chemicals. It trades about -0.04 of its total potential returns per unit of risk. Kukdong Oil Chemicals is currently generating about -0.08 per unit of volatility. If you would invest  347,081  in Kukdong Oil Chemicals on December 24, 2024 and sell it today you would lose (11,581) from holding Kukdong Oil Chemicals or give up 3.34% of portfolio value over 90 days.

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

KB Financial Group  vs.  Kukdong Oil Chemicals

KB Financial Group

Risk-Adjusted Performance

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.

Kukdong Oil Chemicals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KB Financial and Kukdong Oil

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

The idea behind KB Financial Group and Kukdong Oil Chemicals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.