Correlation Between Banco De and KB Financial

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

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

Diversification Opportunities for Banco De and KB Financial

-0.64

Correlation Coefficient

Banco De  KB Financial

Excellent diversification

The 3 months correlation between Banco and KB Financial is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile 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 Banco De 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 Banco De Chile 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 Banco De i.e., Banco De and KB Financial go up and down completely randomly.

Pair Corralation between Banco De and KB Financial

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.8 times more return on investment than KB Financial. However, Banco De Chile is 1.24 times less risky than KB Financial. It trades about 0.36 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.07 per unit of risk. If you would invest  2,088  in Banco De Chile on December 29, 2024 and sell it today you would earn a total of  608.00  from holding Banco De Chile or generate 29.12% return on investment over 90 days.

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

Banco De Chile  vs.  KB Financial Group

Banco De Chile

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 fundamental drivers, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco De and KB Financial

The main advantage of trading using opposite Banco De and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De 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 Banco De Chile 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.