Correlation Between KBC Ancora and Inchcape Plc

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

By analyzing existing cross correlation between KBC Ancora SCA and Inchcape plc, you can compare the effects of market volatilities on KBC Ancora and Inchcape Plc 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 KBC Ancora with a short position of Inchcape Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Ancora and Inchcape Plc.

Diversification Opportunities for KBC Ancora and Inchcape Plc

0.68

Correlation Coefficient

KBC Ancora  Inchcape Plc

Poor diversification

The 3 months correlation between KBC and Inchcape is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KBC Ancora SCA and Inchcape plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape plc and KBC Ancora 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 KBC Ancora SCA are associated (or correlated) with Inchcape Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape plc has no effect on the direction of KBC Ancora i.e., KBC Ancora and Inchcape Plc go up and down completely randomly.

Pair Corralation between KBC Ancora and Inchcape Plc

Assuming the 90 days horizon KBC Ancora SCA is expected to generate 0.83 times more return on investment than Inchcape Plc. However, KBC Ancora SCA is 1.21 times less risky than Inchcape Plc. It trades about 0.09 of its potential returns per unit of risk. Inchcape plc is currently generating about 0.04 per unit of risk. If you would invest  4,320  in KBC Ancora SCA on September 24, 2024 and sell it today you would earn a total of  625.00  from holding KBC Ancora SCA or generate 14.47% return on investment over 90 days.

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

KBC Ancora SCA  vs.  Inchcape plc

KBC Ancora SCA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Ancora SCA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KBC Ancora is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Inchcape plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KBC Ancora and Inchcape Plc

The main advantage of trading using opposite KBC Ancora and Inchcape Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBC Ancora position performs unexpectedly, Inchcape Plc 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 Inchcape Plc will offset losses from the drop in Inchcape Plc's long position.

The idea behind KBC Ancora SCA and Inchcape plc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.