Correlation Between Korea Steel and KB Financial
Can any of the company-specific risk be diversified away by investing in both Korea Steel 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 Korea Steel and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and KB Financial Group, you can compare the effects of market volatilities on Korea Steel 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 Korea Steel with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and KB Financial.
Diversification Opportunities for Korea Steel and KB Financial
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korea and 105560 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co 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 Korea Steel 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 Korea Steel Co 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 Korea Steel i.e., Korea Steel and KB Financial go up and down completely randomly.
Pair Corralation between Korea Steel and KB Financial
Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the KB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 1.52 times less risky than KB Financial. The stock trades about -0.04 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 4,567,742 in KB Financial Group on November 7, 2024 and sell it today you would earn a total of 4,562,258 from holding KB Financial Group or generate 99.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Steel Co vs. KB Financial Group
Performance |
| Timeline |
| Korea Steel |
| KB Financial Group |
Korea Steel and KB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and KB Financial
The main advantage of trading using opposite Korea Steel and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel 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.| Korea Steel vs. Dong Il Steel | Korea Steel vs. Seah Steel Corp | Korea Steel vs. Ajusteel Co | Korea Steel vs. Ni Steel |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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