Correlation Between KB Financial and Formetal

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

Diversification Opportunities for KB Financial and Formetal

-0.62

Correlation Coefficient

KB Financial  Formetal

Excellent diversification

The 3 months correlation between 105560 and Formetal is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal 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 Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of KB Financial i.e., KB Financial and Formetal go up and down completely randomly.

Pair Corralation between KB Financial and Formetal

Assuming the 90 days trading horizon KB Financial is expected to generate 4.01 times less return on investment than Formetal. But when comparing it to its historical volatility, KB Financial Group is 1.25 times less risky than Formetal. It trades about 0.02 of its potential returns per unit of risk. Formetal Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  278,358  in Formetal Co on October 4, 2024 and sell it today you would earn a total of  21,642  from holding Formetal Co or generate 7.77% return on investment over 90 days.

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

KB Financial Group  vs.  Formetal Co

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.

Formetal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KB Financial and Formetal

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

The idea behind KB Financial Group and Formetal Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.