Correlation Between KB Financial and ICICI Bank

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

Diversification Opportunities for KB Financial and ICICI Bank

-0.29

Correlation Coefficient

KB Financial  ICICI Bank

Very good diversification

The 3 months correlation between KB Financial and ICICI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited 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 ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of KB Financial i.e., KB Financial and ICICI Bank go up and down completely randomly.

Pair Corralation between KB Financial and ICICI Bank

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the ICICI Bank. In addition to that, KB Financial is 2.09 times more volatile than ICICI Bank Limited. It trades about -0.26 of its total potential returns per unit of risk. ICICI Bank Limited is currently generating about -0.05 per unit of volatility. If you would invest  3,101  in ICICI Bank Limited on September 27, 2024 and sell it today you would lose (49.00) from holding ICICI Bank Limited or give up 1.58% of portfolio value over 90 days.

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

KB Financial Group  vs.  ICICI Bank Limited

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.

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, ICICI Bank is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and ICICI Bank

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

The idea behind KB Financial Group and ICICI Bank Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.