Correlation Between Bank Leumi and KBC Groep

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

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

Diversification Opportunities for Bank Leumi and KBC Groep

-0.47

Correlation Coefficient

Bank Leumi  KBC Groep

Very good diversification

The 3 months correlation between Bank and KBC is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank Leumi Le 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 Bank Leumi 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 Bank Leumi Le 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 Bank Leumi i.e., Bank Leumi and KBC Groep go up and down completely randomly.

Pair Corralation between Bank Leumi and KBC Groep

Assuming the 90 days horizon Bank Leumi Le is expected to generate 2.21 times more return on investment than KBC Groep. However, Bank Leumi is 2.21 times more volatile than KBC Groep NV. It trades about 0.08 of its potential returns per unit of risk. KBC Groep NV is currently generating about 0.08 per unit of risk. If you would invest  748.00  in Bank Leumi Le on September 4, 2024 and sell it today you would earn a total of  152.00  from holding Bank Leumi Le or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	36.99%
Values	Daily Returns

Bank Leumi Le   vs.  KBC Groep NV

Bank Leumi Le

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Bank Leumi and KBC Groep

The main advantage of trading using opposite Bank Leumi and KBC Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Leumi 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 Bank Leumi Le 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..