Correlation Between KB Financial and Oriental Land

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

Diversification Opportunities for KB Financial and Oriental Land

0.62

Correlation Coefficient

KB Financial  Oriental Land

Poor diversification

The 3 months correlation between KB Financial and Oriental is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Oriental Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Land 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 Oriental Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Land has no effect on the direction of KB Financial i.e., KB Financial and Oriental Land go up and down completely randomly.

Pair Corralation between KB Financial and Oriental Land

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the Oriental Land. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.26 times less risky than Oriental Land. The stock trades about -0.06 of its potential returns per unit of risk. The Oriental Land Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,157  in Oriental Land Co on December 30, 2024 and sell it today you would lose (141.00) from holding Oriental Land Co or give up 6.54% 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.  Oriental Land Co

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.

Oriental Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oriental Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Oriental Land is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Oriental Land

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

The idea behind KB Financial Group and Oriental Land Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.