Correlation Between KB Financial and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both KB Financial and SM Entertainment 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 KB Financial and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Financial Group and SM Entertainment Co, you can compare the effects of market volatilities on KB Financial and SM Entertainment 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 KB Financial with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and SM Entertainment.
Diversification Opportunities for KB Financial and SM Entertainment
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 105560 and 041510 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and KB 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 KB Financial Group are associated (or correlated) with SM Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Entertainment has no effect on the direction of KB Financial i.e., KB Financial and SM Entertainment go up and down completely randomly.
Pair Corralation between KB Financial and SM Entertainment
Assuming the 90 days trading horizon KB Financial Group is expected to under-perform the SM Entertainment. In addition to that, KB Financial is 1.07 times more volatile than SM Entertainment Co. It trades about -0.17 of its total potential returns per unit of risk. SM Entertainment Co is currently generating about -0.03 per unit of volatility. If you would invest 7,810,000 in SM Entertainment Co on September 22, 2024 and sell it today you would lose (220,000) from holding SM Entertainment Co or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Financial Group vs. SM Entertainment Co
Performance |
| Timeline |
| KB Financial Group |
| SM Entertainment |
KB Financial and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Financial and SM Entertainment
The main advantage of trading using opposite KB Financial and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, SM Entertainment 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 SM Entertainment will offset losses from the drop in SM Entertainment's long position.| KB Financial vs. Atinum Investment Co | KB Financial vs. SV Investment | KB Financial vs. KyungIn Electronics Co | KB Financial vs. DSC Investment |
| SM Entertainment vs. Samsung Electronics Co | SM Entertainment vs. Samsung Electronics Co | SM Entertainment vs. KB Financial Group | SM Entertainment vs. Shinhan Financial Group |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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