Correlation Between KB Financial and EuropaCorp

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

Diversification Opportunities for KB Financial and EuropaCorp

-0.33

Correlation Coefficient

KB Financial  EuropaCorp

Very good diversification

The 3 months correlation between KBIA and EuropaCorp is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and EuropaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuropaCorp 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 EuropaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuropaCorp has no effect on the direction of KB Financial i.e., KB Financial and EuropaCorp go up and down completely randomly.

Pair Corralation between KB Financial and EuropaCorp

Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the EuropaCorp. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.22 times less risky than EuropaCorp. The stock trades about -0.26 of its potential returns per unit of risk. The EuropaCorp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  35.00  in EuropaCorp on September 23, 2024 and sell it today you would lose (4.00) from holding EuropaCorp or give up 11.43% of portfolio value over 90 days.

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

KB Financial Group  vs.  EuropaCorp

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.

EuropaCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuropaCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KB Financial and EuropaCorp

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

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