Correlation Between KB Financial and Western Alliance

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

Diversification Opportunities for KB Financial and Western Alliance

-0.15

Correlation Coefficient

KB Financial  Western Alliance

Good diversification

The 3 months correlation between KB Financial and Western is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of KB Financial i.e., KB Financial and Western Alliance go up and down completely randomly.

Pair Corralation between KB Financial and Western Alliance

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the Western Alliance. In addition to that, KB Financial is 2.0 times more volatile than Western Alliance Bancorporation. It trades about -0.07 of its total potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.05 per unit of volatility. If you would invest  2,178  in Western Alliance Bancorporation on December 24, 2024 and sell it today you would earn a total of  47.00  from holding Western Alliance Bancorporation or generate 2.16% return on investment over 90 days.

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

KB Financial Group  vs.  Western Alliance 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 latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Western Alliance Ban

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Western Alliance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Western Alliance

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

The idea behind KB Financial Group and Western Alliance Bancorporation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.