Correlation Between Home Federal and KB Financial

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

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

Diversification Opportunities for Home Federal and KB Financial

-0.33

Correlation Coefficient

Home Federal  KB Financial

Very good diversification

The 3 months correlation between Home and KB Financial is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp 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 Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and KB Financial go up and down completely randomly.

Pair Corralation between Home Federal and KB Financial

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 0.8 times more return on investment than KB Financial. However, Home Federal Bancorp is 1.26 times less risky than KB Financial. It trades about 0.07 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.16 per unit of risk. If you would invest  1,227  in Home Federal Bancorp on September 20, 2024 and sell it today you would earn a total of  33.00  from holding Home Federal Bancorp or generate 2.69% return on investment over 90 days.

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

Home Federal Bancorp  vs.  KB Financial Group

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 Home Federal and KB Financial

The main advantage of trading using opposite Home Federal and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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 Home Federal Bancorp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.