Correlation Between KBC Groep and Swedbank

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

Diversification Opportunities for KBC Groep and Swedbank

0.93

Correlation Coefficient

KBC Groep  Swedbank

Almost no diversification

The 3 months correlation between KBC and Swedbank is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB 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 Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of KBC Groep i.e., KBC Groep and Swedbank go up and down completely randomly.

Pair Corralation between KBC Groep and Swedbank

Assuming the 90 days horizon KBC Groep NV is expected to generate 0.93 times more return on investment than Swedbank. However, KBC Groep NV is 1.07 times less risky than Swedbank. It trades about 0.17 of its potential returns per unit of risk. Swedbank AB is currently generating about 0.15 per unit of risk. If you would invest  3,858  in KBC Groep NV on December 29, 2024 and sell it today you would earn a total of  740.00  from holding KBC Groep NV or generate 19.18% return on investment over 90 days.

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

KBC Groep NV  vs.  Swedbank AB

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 13 (%) 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.

Swedbank AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Swedbank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBC Groep and Swedbank

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

The idea behind KBC Groep NV and Swedbank AB 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.