Correlation Between KB Financial and Banco Bradesco

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

Diversification Opportunities for KB Financial and Banco Bradesco

0.38

Correlation Coefficient

KB Financial  Banco Bradesco

Weak diversification

The 3 months correlation between KB Financial and Banco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Banco Bradesco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco SA 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 Banco Bradesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bradesco SA has no effect on the direction of KB Financial i.e., KB Financial and Banco Bradesco go up and down completely randomly.

Pair Corralation between KB Financial and Banco Bradesco

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 0.88 times more return on investment than Banco Bradesco. However, KB Financial Group is 1.14 times less risky than Banco Bradesco. It trades about -0.29 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.32 per unit of risk. If you would invest  6,993  in KB Financial Group on September 23, 2024 and sell it today you would lose (1,085) from holding KB Financial Group or give up 15.52% of portfolio value over 90 days.

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

KB Financial Group  vs.  Banco Bradesco SA

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.

Banco Bradesco SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bradesco SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with KB Financial and Banco Bradesco

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

The idea behind KB Financial Group and Banco Bradesco SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.