Correlation Between KB Financial and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both KB Financial and Smith Nephew 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 Smith Nephew 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 Smith Nephew plc, you can compare the effects of market volatilities on KB Financial and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Smith Nephew.
Diversification Opportunities for KB Financial and Smith Nephew
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between KB Financial and Smith is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Smith Nephew plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew plc has no effect on the direction of KB Financial i.e., KB Financial and Smith Nephew go up and down completely randomly.
Pair Corralation between KB Financial and Smith Nephew
Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the Smith Nephew. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.54 times less risky than Smith Nephew. The stock trades about -0.17 of its potential returns per unit of risk. The Smith Nephew plc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,205 in Smith Nephew plc on December 4, 2024 and sell it today you would earn a total of 255.00 from holding Smith Nephew plc or generate 21.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 72.88% |
Values | Daily Returns |
KB Financial Group vs. Smith Nephew plc
Performance |
Timeline |
KB Financial Group |
Smith Nephew plc |
KB Financial and Smith Nephew Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB Financial and Smith Nephew
The main advantage of trading using opposite KB Financial and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.KB Financial vs. Banco Santander Brasil | KB Financial vs. CrossFirst Bankshares | KB Financial vs. Banco Bradesco SA | KB Financial vs. CF Bankshares |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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