Correlation Between KakaoBank Corp and DB Financial

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

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

Diversification Opportunities for KakaoBank Corp and DB Financial

-0.04

Correlation Coefficient

KakaoBank Corp  DB Financial

Good diversification

The 3 months correlation between KakaoBank and 016610 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding KakaoBank Corp and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and KakaoBank Corp 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 KakaoBank Corp are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of KakaoBank Corp i.e., KakaoBank Corp and DB Financial go up and down completely randomly.

Pair Corralation between KakaoBank Corp and DB Financial

Assuming the 90 days trading horizon KakaoBank Corp is expected to generate 0.54 times more return on investment than DB Financial. However, KakaoBank Corp is 1.84 times less risky than DB Financial. It trades about 0.13 of its potential returns per unit of risk. DB Financial Investment is currently generating about 0.05 per unit of risk. If you would invest  2,030,000  in KakaoBank Corp on September 4, 2024 and sell it today you would earn a total of  305,000  from holding KakaoBank Corp or generate 15.02% return on investment over 90 days.

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

KakaoBank Corp  vs.  DB Financial Investment

KakaoBank Corp

Risk-Adjusted Performance

10 of 100

OK

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

DB Financial Investment

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with KakaoBank Corp and DB Financial

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

The idea behind KakaoBank Corp and DB Financial Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.