Correlation Between KB Financial and First Bancorp
Can any of the company-specific risk be diversified away by investing in both KB Financial and First Bancorp 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 First Bancorp 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 First Bancorp, you can compare the effects of market volatilities on KB Financial and First Bancorp 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and First Bancorp.
Diversification Opportunities for KB Financial and First Bancorp
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KB Financial and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of KB Financial i.e., KB Financial and First Bancorp go up and down completely randomly.
Pair Corralation between KB Financial and First Bancorp
Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 0.84 times more return on investment than First Bancorp. However, KB Financial Group is 1.18 times less risky than First Bancorp. It trades about -0.22 of its potential returns per unit of risk. First Bancorp is currently generating about -0.23 per unit of risk. If you would invest 5,879 in KB Financial Group on January 8, 2025 and sell it today you would lose (893.00) from holding KB Financial Group or give up 15.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Financial Group vs. First Bancorp
Performance |
| Timeline |
| KB Financial Group |
| First Bancorp |
KB Financial and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Financial and First Bancorp
The main advantage of trading using opposite KB Financial and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| KB Financial vs. Shinhan Financial Group | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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