Correlation Between Swedbank and KBC Group

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

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

Diversification Opportunities for Swedbank and KBC Group

-0.09

Correlation Coefficient

Swedbank  KBC Group

Good diversification

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

Pair Corralation between Swedbank and KBC Group

Assuming the 90 days horizon Swedbank AB is expected to generate 0.61 times more return on investment than KBC Group. However, Swedbank AB is 1.65 times less risky than KBC Group. It trades about 0.15 of its potential returns per unit of risk. KBC Group NV is currently generating about 0.05 per unit of risk. If you would invest  1,899  in Swedbank AB on September 27, 2024 and sell it today you would earn a total of  64.00  from holding Swedbank AB or generate 3.37% return on investment over 90 days.

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

Swedbank AB  vs.  KBC Group NV

Swedbank AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedbank AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Swedbank and KBC Group

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

The idea behind Swedbank AB and KBC Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..