Correlation Between Microsoft and KB Financial

Can any of the company-specific risk be diversified away by investing in both Microsoft and KB Financial 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 Microsoft and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and KB Financial Group, you can compare the effects of market volatilities on Microsoft and KB Financial 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 Microsoft with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and KB Financial.

Diversification Opportunities for Microsoft and KB Financial

0.05

Correlation Coefficient

Microsoft  KB Financial

Significant diversification

The 3 months correlation between Microsoft and K1BF34 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group and Microsoft 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 Microsoft are associated (or correlated) with KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Microsoft i.e., Microsoft and KB Financial go up and down completely randomly.

Pair Corralation between Microsoft and KB Financial

Given the investment horizon of 90 days Microsoft is expected to generate 10.75 times less return on investment than KB Financial. But when comparing it to its historical volatility, Microsoft is 2.22 times less risky than KB Financial. It trades about 0.02 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,027  in KB Financial Group on October 7, 2024 and sell it today you would earn a total of  2,892  from holding KB Financial Group or generate 47.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.12%
Values	Daily Returns

Microsoft  vs.  KB Financial Group

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and KB Financial

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

The idea behind Microsoft and KB Financial Group 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.