Correlation Between KB Financial and GALP ENERGIA

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

Diversification Opportunities for KB Financial and GALP ENERGIA

0.78

Correlation Coefficient

KB Financial  GALP ENERGIA

Poor diversification

The 3 months correlation between KBIA and GALP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B 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 GALP ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGIA B has no effect on the direction of KB Financial i.e., KB Financial and GALP ENERGIA go up and down completely randomly.

Pair Corralation between KB Financial and GALP ENERGIA

Assuming the 90 days trading horizon KB Financial Group is expected to generate 0.95 times more return on investment than GALP ENERGIA. However, KB Financial Group is 1.05 times less risky than GALP ENERGIA. It trades about -0.04 of its potential returns per unit of risk. GALP ENERGIA B is currently generating about -0.04 per unit of risk. If you would invest  5,450  in KB Financial Group on December 27, 2024 and sell it today you would lose (300.00) from holding KB Financial Group or give up 5.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

KB Financial Group  vs.  GALP ENERGIA B

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 nearly stable forward indicators, KB Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

GALP ENERGIA B

Risk-Adjusted Performance

Very Weak

Over the last 90 days GALP ENERGIA B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GALP ENERGIA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KB Financial and GALP ENERGIA

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

The idea behind KB Financial Group and GALP ENERGIA B 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.