Correlation Between KB Financial and US Bancorp

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

Diversification Opportunities for KB Financial and US Bancorp

-0.26

Correlation Coefficient

KB Financial  US Bancorp

Very good diversification

The 3 months correlation between KB Financial and USB-PH is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of KB Financial i.e., KB Financial and US Bancorp go up and down completely randomly.

Pair Corralation between KB Financial and US Bancorp

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the US Bancorp. In addition to that, KB Financial is 2.11 times more volatile than US Bancorp. It trades about -0.07 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  2,188  in US Bancorp on December 21, 2024 and sell it today you would earn a total of  84.00  from holding US Bancorp or generate 3.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

KB Financial Group  vs.  US Bancorp

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.

US Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with KB Financial and US Bancorp

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

The idea behind KB Financial Group and US Bancorp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..