Correlation Between KB Financial and Warner Music

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

Diversification Opportunities for KB Financial and Warner Music

0.2

Correlation Coefficient

KB Financial  Warner Music

Modest diversification

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

Pair Corralation between KB Financial and Warner Music

Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the Warner Music. In addition to that, KB Financial is 1.36 times more volatile than Warner Music Group. It trades about -0.08 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.09 per unit of volatility. If you would invest  4,529  in Warner Music Group on October 7, 2024 and sell it today you would earn a total of  251.00  from holding Warner Music Group or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

KB Financial Group  vs.  Warner Music Group

KB Financial Group

Risk-Adjusted Performance

1 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Warner Music Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Warner Music sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Warner Music

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

The idea behind KB Financial Group and Warner Music 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.