Correlation Between KB Financial and Shopify

Can any of the company-specific risk be diversified away by investing in both KB Financial and Shopify 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 Shopify 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 Shopify, you can compare the effects of market volatilities on KB Financial and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Shopify.

Diversification Opportunities for KB Financial and Shopify

-0.16

Correlation Coefficient

KB Financial  Shopify

Good diversification

The 3 months correlation between K1BF34 and Shopify is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of KB Financial i.e., KB Financial and Shopify go up and down completely randomly.

Pair Corralation between KB Financial and Shopify

Assuming the 90 days trading horizon KB Financial is expected to generate 54.25 times less return on investment than Shopify. But when comparing it to its historical volatility, KB Financial Group is 1.64 times less risky than Shopify. It trades about 0.01 of its potential returns per unit of risk. Shopify is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  377.00  in Shopify on October 24, 2024 and sell it today you would earn a total of  153.00  from holding Shopify or generate 40.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

KB Financial Group  vs.  Shopify

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.

Shopify

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Shopify sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Shopify

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

The idea behind KB Financial Group and Shopify 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.