Correlation Between KB Financial and Investec

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

Diversification Opportunities for KB Financial and Investec

-0.37

Correlation Coefficient

KB Financial  Investec

Very good diversification

The 3 months correlation between KB Financial and Investec is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Group 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Group has no effect on the direction of KB Financial i.e., KB Financial and Investec go up and down completely randomly.

Pair Corralation between KB Financial and Investec

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 6.79 times more return on investment than Investec. However, KB Financial is 6.79 times more volatile than Investec Group. It trades about 0.08 of its potential returns per unit of risk. Investec Group is currently generating about 0.09 per unit of risk. If you would invest  3,882  in KB Financial Group on September 20, 2024 and sell it today you would earn a total of  1,950  from holding KB Financial Group or generate 50.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

KB Financial Group  vs.  Investec Group

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.

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Investec

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

The idea behind KB Financial Group and Investec Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.