Correlation Between KB Financial and Sejong Telecom

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

Diversification Opportunities for KB Financial and Sejong Telecom

-0.14

Correlation Coefficient

KB Financial  Sejong Telecom

Good diversification

The 3 months correlation between 105560 and Sejong is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Sejong Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sejong Telecom 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 Sejong Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sejong Telecom has no effect on the direction of KB Financial i.e., KB Financial and Sejong Telecom go up and down completely randomly.

Pair Corralation between KB Financial and Sejong Telecom

Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the Sejong Telecom. In addition to that, KB Financial is 2.14 times more volatile than Sejong Telecom. It trades about -0.17 of its total potential returns per unit of risk. Sejong Telecom is currently generating about -0.27 per unit of volatility. If you would invest  43,400  in Sejong Telecom on September 22, 2024 and sell it today you would lose (3,700) from holding Sejong Telecom or give up 8.53% of portfolio value over 90 days.

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

KB Financial Group  vs.  Sejong Telecom

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.

Sejong Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sejong Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KB Financial and Sejong Telecom

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

The idea behind KB Financial Group and Sejong Telecom 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.