Correlation Between KB Financial and Settlebank

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

Diversification Opportunities for KB Financial and Settlebank

-0.62

Correlation Coefficient

KB Financial  Settlebank

Excellent diversification

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

Pair Corralation between KB Financial and Settlebank

Assuming the 90 days trading horizon KB Financial Group is expected to generate 1.12 times more return on investment than Settlebank. However, KB Financial is 1.12 times more volatile than Settlebank. It trades about 0.13 of its potential returns per unit of risk. Settlebank is currently generating about -0.12 per unit of risk. If you would invest  8,377,171  in KB Financial Group on September 5, 2024 and sell it today you would earn a total of  1,742,829  from holding KB Financial Group or generate 20.8% 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.  Settlebank

KB Financial Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank 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 Settlebank

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

The idea behind KB Financial Group and Settlebank 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 Transaction History module to view history of all your transactions and understand their impact on performance.