Correlation Between KB Financial and Doosan Heavy

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

Diversification Opportunities for KB Financial and Doosan Heavy

0.78

Correlation Coefficient

KB Financial  Doosan Heavy

Poor diversification

The 3 months correlation between 105560 and Doosan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Doosan Heavy Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Heavy Ind 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 Doosan Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Heavy Ind has no effect on the direction of KB Financial i.e., KB Financial and Doosan Heavy go up and down completely randomly.

Pair Corralation between KB Financial and Doosan Heavy

Assuming the 90 days trading horizon KB Financial Group is expected to generate 0.94 times more return on investment than Doosan Heavy. However, KB Financial Group is 1.07 times less risky than Doosan Heavy. It trades about -0.17 of its potential returns per unit of risk. Doosan Heavy Ind is currently generating about -0.22 per unit of risk. If you would invest  9,730,000  in KB Financial Group on September 22, 2024 and sell it today you would lose (1,150,000) from holding KB Financial Group or give up 11.82% of portfolio value over 90 days.

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

KB Financial Group  vs.  Doosan Heavy Ind

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 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.

Doosan Heavy Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doosan Heavy Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Doosan Heavy 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 Doosan Heavy

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

The idea behind KB Financial Group and Doosan Heavy Ind 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.