Correlation Between KB Financial and Adidas AG
Can any of the company-specific risk be diversified away by investing in both KB Financial and Adidas AG 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 Adidas AG 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 adidas AG, you can compare the effects of market volatilities on KB Financial and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Adidas AG.
Diversification Opportunities for KB Financial and Adidas AG
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KBIA and Adidas is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of KB Financial i.e., KB Financial and Adidas AG go up and down completely randomly.
Pair Corralation between KB Financial and Adidas AG
Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the Adidas AG. In addition to that, KB Financial is 2.38 times more volatile than adidas AG. It trades about -0.25 of its total potential returns per unit of risk. adidas AG is currently generating about 0.23 per unit of volatility. If you would invest 22,120 in adidas AG on September 25, 2024 and sell it today you would earn a total of 1,370 from holding adidas AG or generate 6.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
KB Financial Group vs. adidas AG
Performance |
Timeline |
KB Financial Group |
adidas AG |
KB Financial and Adidas AG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB Financial and Adidas AG
The main advantage of trading using opposite KB Financial and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.KB Financial vs. China Merchants Bank | KB Financial vs. HDFC Bank Limited | KB Financial vs. ICICI Bank Limited | KB Financial vs. PT Bank Central |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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