Correlation Between KB Financial and Sodexo SA

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

Diversification Opportunities for KB Financial and Sodexo SA

-0.42

Correlation Coefficient

KB Financial  Sodexo SA

Very good diversification

The 3 months correlation between KB Financial and Sodexo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Sodexo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo SA 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 Sodexo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo SA has no effect on the direction of KB Financial i.e., KB Financial and Sodexo SA go up and down completely randomly.

Pair Corralation between KB Financial and Sodexo SA

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 3.92 times more return on investment than Sodexo SA. However, KB Financial is 3.92 times more volatile than Sodexo SA. It trades about 0.07 of its potential returns per unit of risk. Sodexo SA is currently generating about 0.16 per unit of risk. If you would invest  5,055  in KB Financial Group on February 3, 2024 and sell it today you would earn a total of  213.00  from holding KB Financial Group or generate 4.21% return on investment over 90 days.

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

KB Financial Group  vs.  Sodexo SA

KB Financial Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Sodexo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sodexo SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KB Financial and Sodexo SA

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

The idea behind KB Financial Group and Sodexo SA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.