Correlation Between KB Financial and Hochschild Mining

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

Diversification Opportunities for KB Financial and Hochschild Mining

0.29

Correlation Coefficient

KB Financial  Hochschild Mining

Modest diversification

The 3 months correlation between KB Financial and Hochschild is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Hochschild Mining PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochschild Mining PLC 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 Hochschild Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochschild Mining PLC has no effect on the direction of KB Financial i.e., KB Financial and Hochschild Mining go up and down completely randomly.

Pair Corralation between KB Financial and Hochschild Mining

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the Hochschild Mining. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.32 times less risky than Hochschild Mining. The stock trades about -0.15 of its potential returns per unit of risk. The Hochschild Mining PLC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Hochschild Mining PLC on January 24, 2024 and sell it today you would earn a total of  20.00  from holding Hochschild Mining PLC or generate 12.35% return on investment over 90 days.

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

KB Financial Group  vs.  Hochschild Mining PLC

KB Financial Group

Risk-Adjusted Performance

11 of 100

OK

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 inconsistent fundamental drivers, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hochschild Mining PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Hochschild Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Hochschild Mining

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

The idea behind KB Financial Group and Hochschild Mining PLC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.