Correlation Between KB Financial and Genel Energy

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

Diversification Opportunities for KB Financial and Genel Energy

0.78

Correlation Coefficient

KB Financial  Genel Energy

Poor diversification

The 3 months correlation between KB Financial and Genel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Genel Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genel Energy plc 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 Genel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genel Energy plc has no effect on the direction of KB Financial i.e., KB Financial and Genel Energy go up and down completely randomly.

Pair Corralation between KB Financial and Genel Energy

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the Genel Energy. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 2.5 times less risky than Genel Energy. The stock trades about -0.15 of its potential returns per unit of risk. The Genel Energy plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Genel Energy plc on October 12, 2024 and sell it today you would earn a total of  6.00  from holding Genel Energy plc or generate 7.32% 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.  Genel Energy plc

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 fragile performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Genel Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genel Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genel Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KB Financial and Genel Energy

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

The idea behind KB Financial Group and Genel Energy plc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.