Correlation Between Umicore SA and KBC Groep

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

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

Diversification Opportunities for Umicore SA and KBC Groep

-0.04

Correlation Coefficient

Umicore SA  KBC Groep

Good diversification

The 3 months correlation between Umicore and KBC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Umicore SA 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 Umicore SA 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 Umicore SA 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 Umicore SA i.e., Umicore SA and KBC Groep go up and down completely randomly.

Pair Corralation between Umicore SA and KBC Groep

Assuming the 90 days trading horizon Umicore SA is expected to generate 12.44 times less return on investment than KBC Groep. In addition to that, Umicore SA is 2.07 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 0.1 per unit of volatility. If you would invest  6,794  in KBC Groep NV on September 15, 2024 and sell it today you would earn a total of  526.00  from holding KBC Groep NV or generate 7.74% return on investment over 90 days.

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

Umicore SA  vs.  KBC Groep NV

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Umicore SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

KBC Groep NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, KBC Groep may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Umicore SA and KBC Groep

The main advantage of trading using opposite Umicore SA and KBC Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Umicore SA 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 Umicore SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.