Correlation Between KBC Groep and Sofina Socit

Can any of the company-specific risk be diversified away by investing in both KBC Groep and Sofina Socit 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 KBC Groep and Sofina Socit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KBC Groep NV and Sofina Socit Anonyme, you can compare the effects of market volatilities on KBC Groep and Sofina Socit 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 KBC Groep with a short position of Sofina Socit. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Groep and Sofina Socit.

Diversification Opportunities for KBC Groep and Sofina Socit

0.38

Correlation Coefficient

KBC Groep  Sofina Socit

Weak diversification

The 3 months correlation between KBC and Sofina is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Sofina Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofina Socit Anonyme and KBC Groep 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 KBC Groep NV are associated (or correlated) with Sofina Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofina Socit Anonyme has no effect on the direction of KBC Groep i.e., KBC Groep and Sofina Socit go up and down completely randomly.

Pair Corralation between KBC Groep and Sofina Socit

Assuming the 90 days trading horizon KBC Groep NV is expected to generate 0.97 times more return on investment than Sofina Socit. However, KBC Groep NV is 1.03 times less risky than Sofina Socit. It trades about 0.14 of its potential returns per unit of risk. Sofina Socit Anonyme is currently generating about 0.12 per unit of risk. If you would invest  7,438  in KBC Groep NV on December 29, 2024 and sell it today you would earn a total of  1,062  from holding KBC Groep NV or generate 14.28% return on investment over 90 days.

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

KBC Groep NV  vs.  Sofina Socit Anonyme

KBC Groep NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, KBC Groep reported solid returns over the last few months and may actually be approaching a breakup point.

Sofina Socit Anonyme

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Sofina Socit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KBC Groep and Sofina Socit

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

The idea behind KBC Groep NV and Sofina Socit Anonyme 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.