Correlation Between KB Financial and First National

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

Diversification Opportunities for KB Financial and First National

0.36

Correlation Coefficient

KB Financial  First National

Weak diversification

The 3 months correlation between KB Financial and First is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of KB Financial i.e., KB Financial and First National go up and down completely randomly.

Pair Corralation between KB Financial and First National

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the First National. In addition to that, KB Financial is 1.04 times more volatile than First National Corp. It trades about -0.07 of its total potential returns per unit of risk. First National Corp is currently generating about -0.02 per unit of volatility. If you would invest  2,315  in First National Corp on December 29, 2024 and sell it today you would lose (60.00) from holding First National Corp or give up 2.59% 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.  First National Corp

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.

First National Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KB Financial and First National

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

The idea behind KB Financial Group and First National Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.