Correlation Between KB Financial and Fifth Third

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

Diversification Opportunities for KB Financial and Fifth Third

0.7

Correlation Coefficient

KB Financial  Fifth Third

Poor diversification

The 3 months correlation between KB Financial and Fifth is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of KB Financial i.e., KB Financial and Fifth Third go up and down completely randomly.

Pair Corralation between KB Financial and Fifth Third

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 1.35 times more return on investment than Fifth Third. However, KB Financial is 1.35 times more volatile than Fifth Third Bancorp. It trades about -0.06 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.43 per unit of risk. If you would invest  5,848  in KB Financial Group on October 8, 2024 and sell it today you would lose (94.00) from holding KB Financial Group or give up 1.61% of portfolio value over 90 days.

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

KB Financial Group  vs.  Fifth Third Bancorp

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 latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with KB Financial and Fifth Third

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

The idea behind KB Financial Group and Fifth Third Bancorp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.