Correlation Between KB Financial and LG Electronics
Can any of the company-specific risk be diversified away by investing in both KB Financial and LG Electronics 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 LG Electronics 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 LG Electronics, you can compare the effects of market volatilities on KB Financial and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and LG Electronics.
Diversification Opportunities for KB Financial and LG Electronics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 105560 and 066570 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of KB Financial i.e., KB Financial and LG Electronics go up and down completely randomly.
Pair Corralation between KB Financial and LG Electronics
Assuming the 90 days trading horizon KB Financial Group is expected to generate 1.01 times more return on investment than LG Electronics. However, KB Financial is 1.01 times more volatile than LG Electronics. It trades about 0.15 of its potential returns per unit of risk. LG Electronics is currently generating about -0.02 per unit of risk. If you would invest 8,650,000 in KB Financial Group on October 25, 2024 and sell it today you would earn a total of 290,000 from holding KB Financial Group or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Financial Group vs. LG Electronics
Performance |
| Timeline |
| KB Financial Group |
| LG Electronics |
KB Financial and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Financial and LG Electronics
The main advantage of trading using opposite KB Financial and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| KB Financial vs. Hanjoo Light Metal | KB Financial vs. Dong A Steel Technology | KB Financial vs. Youngsin Metal Industrial | KB Financial vs. Shin Steel Co |
| LG Electronics vs. Sungmoon Electronics Co | LG Electronics vs. Kbi Metal Co | LG Electronics vs. Jahwa Electronics Co | LG Electronics vs. PJ Metal Co |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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