Correlation Between KB Financial and PennyMac Financial

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

Diversification Opportunities for KB Financial and PennyMac Financial

-0.27

Correlation Coefficient

KB Financial  PennyMac Financial

Very good diversification

The 3 months correlation between KBIA and PennyMac is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and PennyMac Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Financial 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 PennyMac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Financial has no effect on the direction of KB Financial i.e., KB Financial and PennyMac Financial go up and down completely randomly.

Pair Corralation between KB Financial and PennyMac Financial

If you would invest  3,199  in KB Financial Group on September 18, 2024 and sell it today you would earn a total of  2,301  from holding KB Financial Group or generate 71.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

KB Financial Group  vs.  PennyMac Financial Services

KB Financial Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PennyMac Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennyMac Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PennyMac Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KB Financial and PennyMac Financial

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

The idea behind KB Financial Group and PennyMac Financial Services 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.