Correlation Between US Bancorp and KBC Group

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

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

Diversification Opportunities for US Bancorp and KBC Group

-0.38

Correlation Coefficient

US Bancorp  KBC Group

Very good diversification

The 3 months correlation between USB-PH and KBC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and KBC Group go up and down completely randomly.

Pair Corralation between US Bancorp and KBC Group

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the KBC Group. But the preferred stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 2.73 times less risky than KBC Group. The preferred stock trades about -0.09 of its potential returns per unit of risk. The KBC Group NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,275  in KBC Group NV on September 27, 2024 and sell it today you would earn a total of  106.00  from holding KBC Group NV or generate 1.46% return on investment over 90 days.

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

US Bancorp  vs.  KBC Group NV

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 US Bancorp and KBC Group

The main advantage of trading using opposite US Bancorp and KBC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.