Correlation Between KB Financial and BMT Co

Can any of the company-specific risk be diversified away by investing in both KB Financial and BMT Co 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 BMT Co 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 BMT Co, you can compare the effects of market volatilities on KB Financial and BMT Co 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 BMT Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and BMT Co.

Diversification Opportunities for KB Financial and BMT Co

-0.42

Correlation Coefficient

KB Financial  BMT Co

Very good diversification

The 3 months correlation between 105560 and BMT is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and BMT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMT Co 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 BMT Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMT Co has no effect on the direction of KB Financial i.e., KB Financial and BMT Co go up and down completely randomly.

Pair Corralation between KB Financial and BMT Co

Assuming the 90 days trading horizon KB Financial is expected to generate 2.54 times less return on investment than BMT Co. But when comparing it to its historical volatility, KB Financial Group is 1.06 times less risky than BMT Co. It trades about 0.04 of its potential returns per unit of risk. BMT Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,188,000  in BMT Co on February 6, 2024 and sell it today you would earn a total of  144,000  from holding BMT Co or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

KB Financial Group  vs.  BMT Co

KB Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

BMT Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMT Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BMT Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and BMT Co

The main advantage of trading using opposite KB Financial and BMT Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, BMT Co 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 BMT Co will offset losses from the drop in BMT Co's long position.

The idea behind KB Financial Group and BMT Co 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.

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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.