Correlation Between KB Financial and Sumitomo Mitsui

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

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

Diversification Opportunities for KB Financial and Sumitomo Mitsui

0.2

Correlation Coefficient

KB Financial  Sumitomo Mitsui

Modest diversification

The 3 months correlation between K1BF34 and Sumitomo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and KB Financial 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 KB Financial Group are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of KB Financial i.e., KB Financial and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between KB Financial and Sumitomo Mitsui

Assuming the 90 days trading horizon KB Financial is expected to generate 1.39 times less return on investment than Sumitomo Mitsui. In addition to that, KB Financial is 1.03 times more volatile than Sumitomo Mitsui Financial. It trades about 0.06 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.09 per unit of volatility. If you would invest  4,435  in Sumitomo Mitsui Financial on October 5, 2024 and sell it today you would earn a total of  4,537  from holding Sumitomo Mitsui Financial or generate 102.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.94%
Values	Daily Returns

KB Financial Group  vs.  Sumitomo Mitsui Financial

KB Financial Group

Risk-Adjusted Performance

0 of 100

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.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Sumitomo Mitsui

The main advantage of trading using opposite KB Financial and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.

The idea behind KB Financial Group and Sumitomo Mitsui Financial 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.