Correlation Between KB Financial and CullenFrost Bankers

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

Diversification Opportunities for KB Financial and CullenFrost Bankers

0.71

Correlation Coefficient

KB Financial  CullenFrost Bankers

Poor diversification

The 3 months correlation between KB Financial and CullenFrost is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of KB Financial i.e., KB Financial and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between KB Financial and CullenFrost Bankers

Allowing for the 90-day total investment horizon KB Financial is expected to generate 2.52 times less return on investment than CullenFrost Bankers. In addition to that, KB Financial is 1.06 times more volatile than CullenFrost Bankers. It trades about 0.06 of its total potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.17 per unit of volatility. If you would invest  11,174  in CullenFrost Bankers on September 2, 2024 and sell it today you would earn a total of  2,888  from holding CullenFrost Bankers or generate 25.85% return on investment over 90 days.

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

KB Financial Group  vs.  CullenFrost Bankers

KB Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CullenFrost Bankers

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CullenFrost Bankers are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, CullenFrost Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and CullenFrost Bankers

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

The idea behind KB Financial Group and CullenFrost Bankers 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 Anywhere module to track or share privately all of your investments from the convenience of any device.