Correlation Between KB Financial and TOHOKU EL

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

Diversification Opportunities for KB Financial and TOHOKU EL

0.29

Correlation Coefficient

KB Financial  TOHOKU EL

Modest diversification

The 3 months correlation between KBIA and TOHOKU is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and TOHOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOHOKU EL PWR 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 TOHOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOHOKU EL PWR has no effect on the direction of KB Financial i.e., KB Financial and TOHOKU EL go up and down completely randomly.

Pair Corralation between KB Financial and TOHOKU EL

Assuming the 90 days trading horizon KB Financial Group is expected to generate 1.24 times more return on investment than TOHOKU EL. However, KB Financial is 1.24 times more volatile than TOHOKU EL PWR. It trades about -0.02 of its potential returns per unit of risk. TOHOKU EL PWR is currently generating about -0.11 per unit of risk. If you would invest  5,350  in KB Financial Group on December 28, 2024 and sell it today you would lose (200.00) from holding KB Financial Group or give up 3.74% of portfolio value over 90 days.

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

KB Financial Group  vs.  TOHOKU EL PWR

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

TOHOKU EL PWR

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOHOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KB Financial and TOHOKU EL

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

The idea behind KB Financial Group and TOHOKU EL PWR 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.