Correlation Between KB Financial and Columbia Banking

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

Diversification Opportunities for KB Financial and Columbia Banking

0.83

Correlation Coefficient

KB Financial  Columbia Banking

Very poor diversification

The 3 months correlation between KB Financial and Columbia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Columbia Banking System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Banking System 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 Columbia Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Banking System has no effect on the direction of KB Financial i.e., KB Financial and Columbia Banking go up and down completely randomly.

Pair Corralation between KB Financial and Columbia Banking

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 0.88 times more return on investment than Columbia Banking. However, KB Financial Group is 1.13 times less risky than Columbia Banking. It trades about -0.06 of its potential returns per unit of risk. Columbia Banking System is currently generating about -0.06 per unit of risk. If you would invest  5,700  in KB Financial Group on December 30, 2024 and sell it today you would lose (364.00) from holding KB Financial Group or give up 6.39% of portfolio value over 90 days.

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

KB Financial Group  vs.  Columbia Banking System

KB Financial Group

Risk-Adjusted Performance

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.

Columbia Banking System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Banking System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KB Financial and Columbia Banking

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

The idea behind KB Financial Group and Columbia Banking System 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.