Correlation Between KB Financial and Middlefield Banc

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

Diversification Opportunities for KB Financial and Middlefield Banc

0.48

Correlation Coefficient

KB Financial  Middlefield Banc

Very weak diversification

The 3 months correlation between KB Financial and Middlefield is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and Middlefield Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlefield Banc 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 Middlefield Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlefield Banc has no effect on the direction of KB Financial i.e., KB Financial and Middlefield Banc go up and down completely randomly.

Pair Corralation between KB Financial and Middlefield Banc

Allowing for the 90-day total investment horizon KB Financial Group is expected to generate 1.27 times more return on investment than Middlefield Banc. However, KB Financial is 1.27 times more volatile than Middlefield Banc. It trades about 0.15 of its potential returns per unit of risk. Middlefield Banc is currently generating about -0.04 per unit of risk. If you would invest  6,602  in KB Financial Group on May 9, 2025 and sell it today you would earn a total of  1,722  from holding KB Financial Group or generate 26.08% return on investment over 90 days.

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

KB Financial Group  vs.  Middlefield Banc

KB Financial Group

Risk-Adjusted Performance

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.

Middlefield Banc

Risk-Adjusted Performance

Weakest

Over the last 90 days Middlefield Banc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Middlefield Banc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KB Financial and Middlefield Banc

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

The idea behind KB Financial Group and Middlefield Banc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.