Correlation Between KB Financial and Toro Energy

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

Diversification Opportunities for KB Financial and Toro Energy

-0.39

Correlation Coefficient

KB Financial  Toro Energy

Very good diversification

The 3 months correlation between KB Financial and Toro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Toro Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro Energy Limited 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 Toro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro Energy Limited has no effect on the direction of KB Financial i.e., KB Financial and Toro Energy go up and down completely randomly.

Pair Corralation between KB Financial and Toro Energy

Allowing for the 90-day total investment horizon KB Financial is expected to generate 3.16 times less return on investment than Toro Energy. But when comparing it to its historical volatility, KB Financial Group is 2.06 times less risky than Toro Energy. It trades about 0.07 of its potential returns per unit of risk. Toro Energy Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Toro Energy Limited on February 2, 2024 and sell it today you would earn a total of  3.00  from holding Toro Energy Limited or generate 10.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.96%
Values	Daily Returns

KB Financial Group  vs.  Toro Energy Limited

KB Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Toro Energy Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Toro Energy

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

The idea behind KB Financial Group and Toro Energy Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.