Correlation Between KB Financial and West Bancorporation

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

Diversification Opportunities for KB Financial and West Bancorporation

-0.25

Correlation Coefficient

KB Financial  West Bancorporation

Very good diversification

The 3 months correlation between KB Financial and West is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and West Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Bancorporation 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 West Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Bancorporation has no effect on the direction of KB Financial i.e., KB Financial and West Bancorporation go up and down completely randomly.

Pair Corralation between KB Financial and West Bancorporation

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 2.04 times more return on investment than West Bancorporation. However, KB Financial is 2.04 times more volatile than West Bancorporation. It trades about 0.13 of its potential returns per unit of risk. West Bancorporation is currently generating about -0.1 per unit of risk. If you would invest  5,072  in KB Financial Group on January 29, 2024 and sell it today you would earn a total of  394.00  from holding KB Financial Group or generate 7.77% return on investment over 90 days.

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

KB Financial Group  vs.  West Bancorp.

KB Financial Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 12 (%) 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.

West Bancorporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KB Financial and West Bancorporation

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

The idea behind KB Financial Group and West Bancorporation 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.