Correlation Between Constellation Software and KB Financial

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

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

Diversification Opportunities for Constellation Software and KB Financial

0.13

Correlation Coefficient

Constellation Software  KB Financial

Average diversification

The 3 months correlation between Constellation and KBIA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software 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 Constellation Software 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 Constellation Software 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 Constellation Software i.e., Constellation Software and KB Financial go up and down completely randomly.

Pair Corralation between Constellation Software and KB Financial

Assuming the 90 days trading horizon Constellation Software is expected to generate 0.54 times more return on investment than KB Financial. However, Constellation Software is 1.84 times less risky than KB Financial. It trades about 0.12 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  150,127  in Constellation Software on October 4, 2024 and sell it today you would earn a total of  152,373  from holding Constellation Software or generate 101.5% return on investment over 90 days.

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

Constellation Software  vs.  KB Financial Group

Constellation Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 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.

Pair Trading with Constellation Software and KB Financial

The main advantage of trading using opposite Constellation Software and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software 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 Constellation Software 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.