Correlation Between Pacific Premier and KB Financial

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

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

Diversification Opportunities for Pacific Premier and KB Financial

0.34

Correlation Coefficient

Pacific Premier  KB Financial

Weak diversification

The 3 months correlation between Pacific and KB Financial is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp 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 Pacific Premier 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 Pacific Premier Bancorp 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 Pacific Premier i.e., Pacific Premier and KB Financial go up and down completely randomly.

Pair Corralation between Pacific Premier and KB Financial

Given the investment horizon of 90 days Pacific Premier Bancorp is expected to under-perform the KB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Pacific Premier Bancorp is 1.05 times less risky than KB Financial. The stock trades about 0.0 of its potential returns per unit of risk. The KB Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,686  in KB Financial Group on October 5, 2024 and sell it today you would earn a total of  2,000  from holding KB Financial Group or generate 54.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Pacific Premier Bancorp  vs.  KB Financial Group

Pacific Premier Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Premier Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Pacific Premier is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

KB Financial Group

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pacific Premier and KB Financial

The main advantage of trading using opposite Pacific Premier and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Premier 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 Pacific Premier Bancorp 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.