Correlation Between KBC Group and BNP Paribas

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

Diversification Opportunities for KBC Group and BNP Paribas

0.91

Correlation Coefficient

KBC Group  BNP Paribas

Almost no diversification

The 3 months correlation between KBC and BNP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding KBC Group NV and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA 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 BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas SA has no effect on the direction of KBC Group i.e., KBC Group and BNP Paribas go up and down completely randomly.

Pair Corralation between KBC Group and BNP Paribas

Assuming the 90 days horizon KBC Group is expected to generate 1.73 times less return on investment than BNP Paribas. But when comparing it to its historical volatility, KBC Group NV is 1.15 times less risky than BNP Paribas. It trades about 0.21 of its potential returns per unit of risk. BNP Paribas SA is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  5,833  in BNP Paribas SA on December 26, 2024 and sell it today you would earn a total of  2,178  from holding BNP Paribas SA or generate 37.34% return on investment over 90 days.

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

KBC Group NV  vs.  BNP Paribas SA

KBC Group NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KBC Group reported solid returns over the last few months and may actually be approaching a breakup point.

BNP Paribas SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BNP Paribas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBC Group and BNP Paribas

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

The idea behind KBC Group NV and BNP Paribas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.