Correlation Between KBC Groep and US Bancorp

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

Diversification Opportunities for KBC Groep and US Bancorp

-0.43

Correlation Coefficient

KBC Groep  US Bancorp

Very good diversification

The 3 months correlation between KBC and USB-PA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and US Bancorp PERP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp PERP 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp PERP has no effect on the direction of KBC Groep i.e., KBC Groep and US Bancorp go up and down completely randomly.

Pair Corralation between KBC Groep and US Bancorp

Assuming the 90 days horizon KBC Groep is expected to generate 17.23 times less return on investment than US Bancorp. In addition to that, KBC Groep is 1.98 times more volatile than US Bancorp PERP. It trades about 0.0 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.11 per unit of volatility. If you would invest  83,066  in US Bancorp PERP on September 5, 2024 and sell it today you would earn a total of  3,634  from holding US Bancorp PERP or generate 4.37% return on investment over 90 days.

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

KBC Groep NV  vs.  US Bancorp PERP

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.

US Bancorp PERP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp PERP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KBC Groep and US Bancorp

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

The idea behind KBC Groep NV and US Bancorp PERP 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.