Correlation Between GM and KB Financial
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KB Financial Group, you can compare the effects of market volatilities on GM 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 GM with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KB Financial.
Diversification Opportunities for GM and KB Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and KBIA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and KB Financial go up and down completely randomly.
Pair Corralation between GM and KB Financial
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than KB Financial. However, GM is 1.0 times more volatile than KB Financial Group. It trades about 0.15 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.13 per unit of risk. If you would invest 4,648 in General Motors on August 28, 2024 and sell it today you would earn a total of 831.00 from holding General Motors or generate 17.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. KB Financial Group
Performance |
| Timeline |
| General Motors |
| KB Financial Group |
GM and KB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and KB Financial
The main advantage of trading using opposite GM and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| KB Financial vs. GOLD ROAD RES | KB Financial vs. ECHO INVESTMENT ZY | KB Financial vs. Air Transport Services | KB Financial vs. TITANIUM TRANSPORTGROUP |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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