Correlation Between Shinhan Financial and KB Financial

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

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

Diversification Opportunities for Shinhan Financial and KB Financial

0.95

Correlation Coefficient

Shinhan Financial  KB Financial

Almost no diversification

The 3 months correlation between Shinhan and KB Financial is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group 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 Shinhan 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 Shinhan Financial Group 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 Shinhan Financial i.e., Shinhan Financial and KB Financial go up and down completely randomly.

Pair Corralation between Shinhan Financial and KB Financial

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 0.91 times more return on investment than KB Financial. However, Shinhan Financial Group is 1.1 times less risky than KB Financial. It trades about -0.03 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.06 per unit of risk. If you would invest  3,287  in Shinhan Financial Group on December 30, 2024 and sell it today you would lose (100.00) from holding Shinhan Financial Group or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Shinhan Financial Group  vs.  KB Financial Group

Shinhan Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 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 Shinhan Financial and KB Financial

The main advantage of trading using opposite Shinhan Financial and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial 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 Shinhan Financial Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.