Correlation Between KBC Groep and Washington Federal

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

Diversification Opportunities for KBC Groep and Washington Federal

0.34

Correlation Coefficient

KBC Groep  Washington Federal

Weak diversification

The 3 months correlation between KBC and Washington is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of KBC Groep i.e., KBC Groep and Washington Federal go up and down completely randomly.

Pair Corralation between KBC Groep and Washington Federal

Assuming the 90 days horizon KBC Groep is expected to generate 4.41 times less return on investment than Washington Federal. In addition to that, KBC Groep is 1.2 times more volatile than Washington Federal. It trades about 0.03 of its total potential returns per unit of risk. Washington Federal is currently generating about 0.14 per unit of volatility. If you would invest  1,462  in Washington Federal on September 5, 2024 and sell it today you would earn a total of  329.00  from holding Washington Federal or generate 22.5% 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.  Washington Federal

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.

Washington Federal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KBC Groep and Washington Federal

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

The idea behind KBC Groep NV and Washington Federal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.