Correlation Between First United and KB Financial

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

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

Diversification Opportunities for First United and KB Financial

-0.05

Correlation Coefficient

First United  KB Financial

Good diversification

The 3 months correlation between First and KB Financial is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding First United 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 First United 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 First United 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 First United i.e., First United and KB Financial go up and down completely randomly.

Pair Corralation between First United and KB Financial

Given the investment horizon of 90 days First United is expected to generate 0.77 times more return on investment than KB Financial. However, First United is 1.3 times less risky than KB Financial. It trades about 0.09 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.05 per unit of risk. If you would invest  1,780  in First United on September 25, 2024 and sell it today you would earn a total of  1,636  from holding First United or generate 91.91% return on investment over 90 days.

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

First United  vs.  KB Financial Group

First United

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First United are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, First United exhibited solid returns over the last few months and may actually be approaching a breakup point.

KB Financial Group

Risk-Adjusted Performance

1 of 100

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

Pair Trading with First United and KB Financial

The main advantage of trading using opposite First United and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First United 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 First United 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.