Correlation Between KB Financial and First Financial
Can any of the company-specific risk be diversified away by investing in both KB Financial and First 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 KB Financial and First Financial 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 Financial Northwest, you can compare the effects of market volatilities on KB Financial and First 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 KB Financial with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and First Financial.
Diversification Opportunities for KB Financial and First Financial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KB Financial and First is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of KB Financial i.e., KB Financial and First Financial go up and down completely randomly.
Pair Corralation between KB Financial and First Financial
Allowing for the 90-day total investment horizon KB Financial is expected to generate 1.85 times less return on investment than First Financial. In addition to that, KB Financial is 1.87 times more volatile than First Financial Northwest. It trades about 0.05 of its total potential returns per unit of risk. First Financial Northwest is currently generating about 0.16 per unit of volatility. If you would invest 2,092 in First Financial Northwest on November 9, 2024 and sell it today you would earn a total of 63.00 from holding First Financial Northwest or generate 3.01% 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. First Financial Northwest
Performance |
| Timeline |
| KB Financial Group |
| First Financial Northwest |
KB Financial and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Financial and First Financial
The main advantage of trading using opposite KB Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial's long position.| KB Financial vs. Shinhan Financial Group | KB Financial vs. Woori Financial Group | KB Financial vs. Korea Electric Power | KB Financial vs. Orix Corp Ads |
| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. Community West Bancshares |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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