Correlation Between KBC Groep and Floridienne

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

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

Diversification Opportunities for KBC Groep and Floridienne

0.35

Correlation Coefficient

KBC Groep  Floridienne

Weak diversification

The 3 months correlation between KBC and Floridienne is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Floridienne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floridienne and KBC Groep 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 Groep NV are associated (or correlated) with Floridienne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floridienne has no effect on the direction of KBC Groep i.e., KBC Groep and Floridienne go up and down completely randomly.

Pair Corralation between KBC Groep and Floridienne

Assuming the 90 days trading horizon KBC Groep NV is expected to generate 0.51 times more return on investment than Floridienne. However, KBC Groep NV is 1.94 times less risky than Floridienne. It trades about 0.07 of its potential returns per unit of risk. Floridienne is currently generating about 0.03 per unit of risk. If you would invest  6,999  in KBC Groep NV on September 22, 2024 and sell it today you would earn a total of  333.00  from holding KBC Groep NV or generate 4.76% return on investment over 90 days.

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

KBC Groep NV  vs.  Floridienne

KBC Groep NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, KBC Groep is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Floridienne

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Floridienne are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Floridienne is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KBC Groep and Floridienne

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

The idea behind KBC Groep NV and Floridienne 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.