Correlation Between KB Financial and Erste Group

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

Diversification Opportunities for KB Financial and Erste Group

-0.58

Correlation Coefficient

KB Financial  Erste Group

Excellent diversification

The 3 months correlation between KB Financial and Erste is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of KB Financial i.e., KB Financial and Erste Group go up and down completely randomly.

Pair Corralation between KB Financial and Erste Group

Allowing for the 90-day total investment horizon KB Financial is expected to generate 2.48 times less return on investment than Erste Group. But when comparing it to its historical volatility, KB Financial Group is 1.74 times less risky than Erste Group. It trades about 0.04 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,082  in Erste Group Bank on September 28, 2024 and sell it today you would earn a total of  3,013  from holding Erste Group Bank or generate 97.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.54%
Values	Daily Returns

KB Financial Group  vs.  Erste Group Bank

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.

Erste Group Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Erste Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Erste Group

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

The idea behind KB Financial Group and Erste Group Bank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.