Correlation Between KBC Groep and UCB SA

Can any of the company-specific risk be diversified away by investing in both KBC Groep and UCB 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 KBC Groep and UCB SA 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 UCB SA, you can compare the effects of market volatilities on KBC Groep and UCB 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 KBC Groep with a short position of UCB SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Groep and UCB SA.

Diversification Opportunities for KBC Groep and UCB SA

-0.18

Correlation Coefficient

KBC Groep  UCB SA

Good diversification

The 3 months correlation between KBC and UCB is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and UCB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCB SA 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 UCB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UCB SA has no effect on the direction of KBC Groep i.e., KBC Groep and UCB SA go up and down completely randomly.

Pair Corralation between KBC Groep and UCB SA

Assuming the 90 days trading horizon KBC Groep is expected to generate 4.04 times less return on investment than UCB SA. But when comparing it to its historical volatility, KBC Groep NV is 1.45 times less risky than UCB SA. It trades about 0.05 of its potential returns per unit of risk. UCB SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  16,160  in UCB SA on September 3, 2024 and sell it today you would earn a total of  2,375  from holding UCB SA or generate 14.7% return on investment over 90 days.

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

KBC Groep NV  vs.  UCB SA

KBC Groep NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, KBC Groep is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

UCB SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, UCB SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBC Groep and UCB SA

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

The idea behind KBC Groep NV and UCB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.