Correlation Between KB Financial and Arkema SA

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

Diversification Opportunities for KB Financial and Arkema SA

-0.63

Correlation Coefficient

KB Financial  Arkema SA

Excellent diversification

The 3 months correlation between KB Financial and Arkema is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Arkema SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA ADR 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 Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA ADR has no effect on the direction of KB Financial i.e., KB Financial and Arkema SA go up and down completely randomly.

Pair Corralation between KB Financial and Arkema SA

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 1.94 times more return on investment than Arkema SA. However, KB Financial is 1.94 times more volatile than Arkema SA ADR. It trades about 0.12 of its potential returns per unit of risk. Arkema SA ADR is currently generating about -0.04 per unit of risk. If you would invest  5,072  in KB Financial Group on January 30, 2024 and sell it today you would earn a total of  394.00  from holding KB Financial Group or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

KB Financial Group  vs.  Arkema SA ADR

KB Financial Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Arkema SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkema SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KB Financial and Arkema SA

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

The idea behind KB Financial Group and Arkema SA ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.