Correlation Between Broadcom and KB Financial

Can any of the company-specific risk be diversified away by investing in both Broadcom and KB Financial 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 Broadcom and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Broadcom and KB Financial Group, you can compare the effects of market volatilities on Broadcom and KB Financial 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 Broadcom with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and KB Financial.

Diversification Opportunities for Broadcom and KB Financial

-0.13

Correlation Coefficient

Broadcom  KB Financial

Good diversification

The 3 months correlation between Broadcom and KBIA is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group and Broadcom 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 Broadcom are associated (or correlated) with KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Broadcom i.e., Broadcom and KB Financial go up and down completely randomly.

Pair Corralation between Broadcom and KB Financial

Assuming the 90 days trading horizon Broadcom is expected to generate 1.26 times more return on investment than KB Financial. However, Broadcom is 1.26 times more volatile than KB Financial Group. It trades about 0.1 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.03 per unit of risk. If you would invest  15,699  in Broadcom on September 19, 2024 and sell it today you would earn a total of  6,906  from holding Broadcom or generate 43.99% return on investment over 90 days.

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

Broadcom  vs.  KB Financial Group

Broadcom

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadcom are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Broadcom unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable forward indicators, KB Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Broadcom and KB Financial

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

The idea behind Broadcom and KB Financial Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.