Correlation Between STMicroelectronics and KB Financial

Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and KB 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 STMicroelectronics and KB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STMicroelectronics NV and KB Financial Group, you can compare the effects of market volatilities on STMicroelectronics and KB 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 STMicroelectronics with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and KB Financial.

Diversification Opportunities for STMicroelectronics and KB Financial

0.93

Correlation Coefficient

STMicroelectronics  KB Financial

Almost no diversification

The 3 months correlation between STMicroelectronics and KBIA is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and KB Financial go up and down completely randomly.

Pair Corralation between STMicroelectronics and KB Financial

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.25 times more return on investment than KB Financial. However, STMicroelectronics is 1.25 times more volatile than KB Financial Group. It trades about 0.25 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.24 per unit of risk. If you would invest  1,800  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  971.00  from holding STMicroelectronics NV or generate 53.94% return on investment over 90 days.

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

STMicroelectronics NV  vs.  KB Financial Group

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

KB Financial Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, KB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and KB Financial

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

The idea behind STMicroelectronics NV and KB Financial Group 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.