Correlation Between KB Financial and Star Diamond

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

Diversification Opportunities for KB Financial and Star Diamond

-0.39

Correlation Coefficient

KB Financial  Star Diamond

Very good diversification

The 3 months correlation between KBIA and Star is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Star Diamond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Diamond 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 Star Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Diamond has no effect on the direction of KB Financial i.e., KB Financial and Star Diamond go up and down completely randomly.

Pair Corralation between KB Financial and Star Diamond

Assuming the 90 days trading horizon KB Financial is expected to generate 4.9 times less return on investment than Star Diamond. But when comparing it to its historical volatility, KB Financial Group is 7.33 times less risky than Star Diamond. It trades about 0.09 of its potential returns per unit of risk. Star Diamond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.70  in Star Diamond on September 3, 2024 and sell it today you would lose (0.90) from holding Star Diamond or give up 33.33% 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.  Star Diamond

KB Financial Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, KB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Star Diamond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Diamond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Star Diamond reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Star Diamond

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

The idea behind KB Financial Group and Star Diamond 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.