Correlation Between KB Financial and System

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

Diversification Opportunities for KB Financial and System

0.14

Correlation Coefficient

KB Financial  System

Average diversification

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

Pair Corralation between KB Financial and System

Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the System. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.21 times less risky than System. The stock trades about -0.03 of its potential returns per unit of risk. The System and Application is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  147,500  in System and Application on December 26, 2024 and sell it today you would lose (300.00) from holding System and Application or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

KB Financial Group  vs.  System and Application

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.

System and Application

Risk-Adjusted Performance

Very Weak

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

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

The idea behind KB Financial Group and System and Application 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.