Correlation Between Foreign Trade and KB Financial

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

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

Diversification Opportunities for Foreign Trade and KB Financial

-0.09

Correlation Coefficient

Foreign Trade  KB Financial

Good diversification

The 3 months correlation between Foreign and KB Financial is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Trade Bank 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 Foreign Trade 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 Foreign Trade Bank 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 Foreign Trade i.e., Foreign Trade and KB Financial go up and down completely randomly.

Pair Corralation between Foreign Trade and KB Financial

Considering the 90-day investment horizon Foreign Trade Bank is expected to generate 0.77 times more return on investment than KB Financial. However, Foreign Trade Bank is 1.29 times less risky than KB Financial. It trades about 0.12 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.06 per unit of risk. If you would invest  1,441  in Foreign Trade Bank on September 20, 2024 and sell it today you would earn a total of  2,131  from holding Foreign Trade Bank or generate 147.88% return on investment over 90 days.

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

Foreign Trade Bank  vs.  KB Financial Group

Foreign Trade Bank

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Foreign Trade may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KB Financial Group

Risk-Adjusted Performance

0 of 100

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 Foreign Trade and KB Financial

The main advantage of trading using opposite Foreign Trade and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foreign Trade 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 Foreign Trade Bank 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.