Correlation Between KB Financial and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both KB Financial and Bank of China Limited 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 Bank of China Limited 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 Bank of China, you can compare the effects of market volatilities on KB Financial and Bank of China Limited 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 Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and Bank of China Limited.
Diversification Opportunities for KB Financial and Bank of China Limited
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KBIA and Bank is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited 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 Bank of China Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Limited has no effect on the direction of KB Financial i.e., KB Financial and Bank of China Limited go up and down completely randomly.
Pair Corralation between KB Financial and Bank of China Limited
Assuming the 90 days trading horizon KB Financial Group is expected to generate 1.44 times more return on investment than Bank of China Limited. However, KB Financial is 1.44 times more volatile than Bank of China. It trades about 0.04 of its potential returns per unit of risk. Bank of China is currently generating about 0.01 per unit of risk. If you would invest 6,550 in KB Financial Group on August 28, 2024 and sell it today you would earn a total of 100.00 from holding KB Financial Group or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
KB Financial Group vs. Bank of China
Performance |
| Timeline |
| KB Financial Group |
| Bank of China Limited |
KB Financial and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Financial and Bank of China Limited
The main advantage of trading using opposite KB Financial and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, Bank of China Limited 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 Bank of China Limited will offset losses from the drop in Bank of China Limited's long position.| KB Financial vs. GOLD ROAD RES | KB Financial vs. ECHO INVESTMENT ZY | KB Financial vs. Air Transport Services | KB Financial vs. TITANIUM TRANSPORTGROUP |
| Bank of China Limited vs. Superior Plus Corp | Bank of China Limited vs. NMI Holdings | Bank of China Limited vs. Origin Agritech | Bank of China Limited vs. SIVERS SEMICONDUCTORS AB |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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