Correlation Between KB Financial and Paradigm Oil

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

Diversification Opportunities for KB Financial and Paradigm Oil

-0.47

Correlation Coefficient

KB Financial  Paradigm Oil

Very good diversification

The 3 months correlation between KB Financial and Paradigm is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Paradigm Oil And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Oil And 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 Paradigm Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Oil And has no effect on the direction of KB Financial i.e., KB Financial and Paradigm Oil go up and down completely randomly.

Pair Corralation between KB Financial and Paradigm Oil

Allowing for the 90-day total investment horizon KB Financial is expected to generate 234.37 times less return on investment than Paradigm Oil. But when comparing it to its historical volatility, KB Financial Group is 67.04 times less risky than Paradigm Oil. It trades about 0.04 of its potential returns per unit of risk. Paradigm Oil And is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Paradigm Oil And on January 31, 2024 and sell it today you would lose (0.03) from holding Paradigm Oil And or give up 60.0% of portfolio value over 90 days.

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

KB Financial Group  vs.  Paradigm Oil And

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.

Paradigm Oil And

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Oil And are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Paradigm Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and Paradigm Oil

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

The idea behind KB Financial Group and Paradigm Oil And 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.