Correlation Between Nordea Bank and KBC Groep

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

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

Diversification Opportunities for Nordea Bank and KBC Groep

-0.09

Correlation Coefficient

Nordea Bank  KBC Groep

Good diversification

The 3 months correlation between Nordea and KBC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp and KBC Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Groep NV and Nordea Bank 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 Nordea Bank Abp are associated (or correlated) with KBC Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Groep NV has no effect on the direction of Nordea Bank i.e., Nordea Bank and KBC Groep go up and down completely randomly.

Pair Corralation between Nordea Bank and KBC Groep

Assuming the 90 days horizon Nordea Bank is expected to generate 3.07 times less return on investment than KBC Groep. But when comparing it to its historical volatility, Nordea Bank Abp is 1.03 times less risky than KBC Groep. It trades about 0.02 of its potential returns per unit of risk. KBC Groep NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,314  in KBC Groep NV on September 28, 2024 and sell it today you would earn a total of  1,536  from holding KBC Groep NV or generate 66.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.81%
Values	Daily Returns

Nordea Bank Abp  vs.  KBC Groep NV

Nordea Bank Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordea Bank Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KBC Groep NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBC Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KBC Groep is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordea Bank and KBC Groep

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

The idea behind Nordea Bank Abp and KBC Groep NV 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.