Correlation Between KBC Groep and Intesa Sanpaolo

Can any of the company-specific risk be diversified away by investing in both KBC Groep and Intesa Sanpaolo 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 Intesa Sanpaolo 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 Intesa Sanpaolo SpA, you can compare the effects of market volatilities on KBC Groep and Intesa Sanpaolo 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 Intesa Sanpaolo. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Groep and Intesa Sanpaolo.

Diversification Opportunities for KBC Groep and Intesa Sanpaolo

0.2

Correlation Coefficient

KBC Groep  Intesa Sanpaolo

Modest diversification

The 3 months correlation between KBC and Intesa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Intesa Sanpaolo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intesa Sanpaolo SpA 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 Intesa Sanpaolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intesa Sanpaolo SpA has no effect on the direction of KBC Groep i.e., KBC Groep and Intesa Sanpaolo go up and down completely randomly.

Pair Corralation between KBC Groep and Intesa Sanpaolo

Assuming the 90 days horizon KBC Groep NV is expected to generate 0.84 times more return on investment than Intesa Sanpaolo. However, KBC Groep NV is 1.18 times less risky than Intesa Sanpaolo. It trades about -0.01 of its potential returns per unit of risk. Intesa Sanpaolo SpA is currently generating about -0.06 per unit of risk. If you would invest  3,655  in KBC Groep NV on September 3, 2024 and sell it today you would lose (49.00) from holding KBC Groep NV or give up 1.34% of portfolio value over 90 days.

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

KBC Groep NV  vs.  Intesa Sanpaolo SpA

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.

Intesa Sanpaolo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intesa Sanpaolo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Intesa Sanpaolo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KBC Groep and Intesa Sanpaolo

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

The idea behind KBC Groep NV and Intesa Sanpaolo SpA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.