Correlation Between KBC Groep and PT Bank

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

Diversification Opportunities for KBC Groep and PT Bank

-0.22

Correlation Coefficient

KBC Groep  PT Bank

Very good diversification

The 3 months correlation between KBC and BKRKF is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of KBC Groep i.e., KBC Groep and PT Bank go up and down completely randomly.

Pair Corralation between KBC Groep and PT Bank

Assuming the 90 days horizon KBC Groep is expected to generate 2.19 times less return on investment than PT Bank. But when comparing it to its historical volatility, KBC Groep NV is 6.57 times less risky than PT Bank. It trades about 0.19 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  22.00  in PT Bank Rakyat on December 3, 2024 and sell it today you would earn a total of  2.00  from holding PT Bank Rakyat or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.25%
Values	Daily Returns

KBC Groep NV  vs.  PT Bank Rakyat

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 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, KBC Groep showed solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Rakyat

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBC Groep and PT Bank

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

The idea behind KBC Groep NV and PT Bank Rakyat 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.