Correlation Between CHINA SOUTHN and KBC Group

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

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

Diversification Opportunities for CHINA SOUTHN and KBC Group

0.57

Correlation Coefficient

CHINA SOUTHN  KBC Group

Very weak diversification

The 3 months correlation between CHINA and KBC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H 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 CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and KBC Group go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and KBC Group

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the KBC Group. In addition to that, CHINA SOUTHN is 2.15 times more volatile than KBC Group NV. It trades about 0.0 of its total potential returns per unit of risk. KBC Group NV is currently generating about 0.05 per unit of volatility. If you would invest  5,507  in KBC Group NV on September 28, 2024 and sell it today you would earn a total of  1,801  from holding KBC Group NV or generate 32.7% return on investment over 90 days.

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

CHINA SOUTHN AIR H   vs.  KBC Group NV

CHINA SOUTHN AIR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CHINA SOUTHN unveiled solid returns over the last few months and may actually be approaching a breakup point.

KBC Group NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KBC Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA SOUTHN and KBC Group

The main advantage of trading using opposite CHINA SOUTHN and KBC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 Stocks Directory module to find actively traded stocks across global markets.