Correlation Between Surge Energy and KB Financial

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

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

Diversification Opportunities for Surge Energy and KB Financial

0.25

Correlation Coefficient

Surge Energy  KB Financial

Modest diversification

The 3 months correlation between Surge and KB Financial is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Surge Energy 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 Surge Energy 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 Surge Energy 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 Surge Energy i.e., Surge Energy and KB Financial go up and down completely randomly.

Pair Corralation between Surge Energy and KB Financial

Assuming the 90 days horizon Surge Energy is expected to under-perform the KB Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Surge Energy is 2.27 times less risky than KB Financial. The pink sheet trades about -0.03 of its potential returns per unit of risk. The KB Financial Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,072  in KB Financial Group on January 29, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Surge Energy  vs.  KB Financial Group

Surge Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Surge Energy reported solid returns over the last few months and may actually be approaching a breakup point.

KB Financial Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 12 (%) 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.

Pair Trading with Surge Energy and KB Financial

The main advantage of trading using opposite Surge Energy and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Surge Energy 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 Surge Energy 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.