Correlation Between KB Financial and Metropolitan Bank

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

Diversification Opportunities for KB Financial and Metropolitan Bank

-0.43

Correlation Coefficient

KB Financial  Metropolitan Bank

Very good diversification

The 3 months correlation between KB Financial and Metropolitan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Metropolitan Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Holding 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 Metropolitan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Bank Holding has no effect on the direction of KB Financial i.e., KB Financial and Metropolitan Bank go up and down completely randomly.

Pair Corralation between KB Financial and Metropolitan Bank

Allowing for the 90-day total investment horizon KB Financial is expected to generate 2.76 times less return on investment than Metropolitan Bank. But when comparing it to its historical volatility, KB Financial Group is 1.57 times less risky than Metropolitan Bank. It trades about 0.1 of its potential returns per unit of risk. Metropolitan Bank Holding is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,506  in Metropolitan Bank Holding on February 2, 2024 and sell it today you would earn a total of  640.00  from holding Metropolitan Bank Holding or generate 18.25% 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.  Metropolitan Bank Holding

KB Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Metropolitan Bank Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Bank Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Metropolitan Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Metropolitan Bank

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

The idea behind KB Financial Group and Metropolitan Bank Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.