Correlation Between Swedbank and KBC Groep

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

Diversification Opportunities for Swedbank and KBC Groep

0.61

Correlation Coefficient

Swedbank  KBC Groep

Poor diversification

The 3 months correlation between Swedbank and KBC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB 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 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 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 Swedbank i.e., Swedbank and KBC Groep go up and down completely randomly.

Pair Corralation between Swedbank and KBC Groep

Assuming the 90 days horizon Swedbank AB is expected to under-perform the KBC Groep. In addition to that, Swedbank is 1.22 times more volatile than KBC Groep NV. It trades about -0.08 of its total potential returns per unit of risk. KBC Groep NV is currently generating about -0.01 per unit of volatility. If you would invest  3,655  in KBC Groep NV on September 2, 2024 and sell it today you would lose (49.00) from holding KBC Groep NV or give up 1.34% of portfolio value over 90 days.

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

Swedbank AB  vs.  KBC Groep 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 weak 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swedbank and KBC Groep

The main advantage of trading using opposite Swedbank and KBC Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedbank 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 Swedbank AB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.