Correlation Between BP Prudhoe and KB Financial

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

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

Diversification Opportunities for BP Prudhoe and KB Financial

-0.06

Correlation Coefficient

BP Prudhoe  KB Financial

Good diversification

The 3 months correlation between BMI and KBIA is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay 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 BP Prudhoe 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 BP Prudhoe Bay 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 BP Prudhoe i.e., BP Prudhoe and KB Financial go up and down completely randomly.

Pair Corralation between BP Prudhoe and KB Financial

Assuming the 90 days horizon BP Prudhoe Bay is expected to generate 3.96 times more return on investment than KB Financial. However, BP Prudhoe is 3.96 times more volatile than KB Financial Group. It trades about 0.01 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.02 per unit of risk. If you would invest  57.00  in BP Prudhoe Bay on December 28, 2024 and sell it today you would lose (6.00) from holding BP Prudhoe Bay or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

BP Prudhoe Bay  vs.  KB Financial Group

BP Prudhoe Bay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP Prudhoe Bay are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BP Prudhoe is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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

Pair Trading with BP Prudhoe and KB Financial

The main advantage of trading using opposite BP Prudhoe and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe 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 BP Prudhoe Bay 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.