Correlation Between Partners Bank and KBC Groep

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

Diversification Opportunities for Partners Bank and KBC Groep

-0.4

Correlation Coefficient

Partners Bank  KBC Groep

Very good diversification

The 3 months correlation between Partners and KBC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Partners Bank of 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 Partners 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 Partners Bank of 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 Partners Bank i.e., Partners Bank and KBC Groep go up and down completely randomly.

Pair Corralation between Partners Bank and KBC Groep

Given the investment horizon of 90 days Partners Bank is expected to generate 32.65 times less return on investment than KBC Groep. In addition to that, Partners Bank is 1.65 times more volatile than KBC Groep NV. It trades about 0.0 of its total potential returns per unit of risk. KBC Groep NV is currently generating about 0.17 per unit of volatility. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Partners Bank of  vs.  KBC Groep NV

Partners Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Partners Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Partners Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Partners Bank and KBC Groep

The main advantage of trading using opposite Partners Bank and KBC Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Partners 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 Partners Bank of 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.