Correlation Between Provident Bancorp and KB Financial

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

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

Diversification Opportunities for Provident Bancorp and KB Financial

-0.32

Correlation Coefficient

Provident Bancorp  KB Financial

Very good diversification

The 3 months correlation between Provident and KB Financial is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Provident 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 Provident Bancorp 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 Provident 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 Provident Bancorp i.e., Provident Bancorp and KB Financial go up and down completely randomly.

Pair Corralation between Provident Bancorp and KB Financial

Given the investment horizon of 90 days Provident Bancorp is expected to generate 1.19 times more return on investment than KB Financial. However, Provident Bancorp is 1.19 times more volatile than KB Financial Group. It trades about 0.05 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.04 per unit of risk. If you would invest  705.00  in Provident Bancorp on September 28, 2024 and sell it today you would earn a total of  456.00  from holding Provident Bancorp or generate 64.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Provident Bancorp  vs.  KB Financial Group

Provident Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Provident Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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 Provident Bancorp and KB Financial

The main advantage of trading using opposite Provident Bancorp and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Bancorp 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 Provident 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.