Correlation Between Fifth Third and KB Financial

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

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

Diversification Opportunities for Fifth Third and KB Financial

0.47

Correlation Coefficient

Fifth Third  KB Financial

Very weak diversification

The 3 months correlation between Fifth and KB Financial is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp 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 Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and KB Financial go up and down completely randomly.

Pair Corralation between Fifth Third and KB Financial

Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 0.84 times more return on investment than KB Financial. However, Fifth Third Bancorp is 1.19 times less risky than KB Financial. It trades about -0.05 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.36 per unit of risk. If you would invest  3,542  in Fifth Third Bancorp on January 17, 2024 and sell it today you would lose (80.00) from holding Fifth Third Bancorp or give up 2.26% of portfolio value over 90 days.

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

Fifth Third Bancorp  vs.  KB Financial Group

Fifth Third Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fifth Third is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Fifth Third and KB Financial

The main advantage of trading using opposite Fifth Third and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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 CEOs Directory module to screen CEOs from public companies around the world.