Correlation Between KBC Group and Brockhaus Capital

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

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

Diversification Opportunities for KBC Group and Brockhaus Capital

-0.47

Correlation Coefficient

KBC Group  Brockhaus Capital

Very good diversification

The 3 months correlation between KBC and Brockhaus is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding KBC Group NV and Brockhaus Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brockhaus Capital and KBC Group 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 Group NV are associated (or correlated) with Brockhaus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brockhaus Capital has no effect on the direction of KBC Group i.e., KBC Group and Brockhaus Capital go up and down completely randomly.

Pair Corralation between KBC Group and Brockhaus Capital

Assuming the 90 days horizon KBC Group NV is expected to generate 0.47 times more return on investment than Brockhaus Capital. However, KBC Group NV is 2.13 times less risky than Brockhaus Capital. It trades about 0.05 of its potential returns per unit of risk. Brockhaus Capital Management is currently generating about 0.02 per unit of risk. If you would invest  5,726  in KBC Group NV on October 3, 2024 and sell it today you would earn a total of  1,650  from holding KBC Group NV or generate 28.82% return on investment over 90 days.

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

KBC Group NV  vs.  Brockhaus Capital Management

KBC Group NV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, KBC Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Brockhaus Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KBC Group and Brockhaus Capital

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

The idea behind KBC Group NV and Brockhaus Capital Management 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.