Correlation Between KBC Group and CaixaBank

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

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

Diversification Opportunities for KBC Group and CaixaBank

-0.1

Correlation Coefficient

KBC Group  CaixaBank

Good diversification

The 3 months correlation between KBC and CaixaBank is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding KBC Group NV and CaixaBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaixaBank SA and KBC Group 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 Group NV are associated (or correlated) with CaixaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaixaBank SA has no effect on the direction of KBC Group i.e., KBC Group and CaixaBank go up and down completely randomly.

Pair Corralation between KBC Group and CaixaBank

Assuming the 90 days horizon KBC Group NV is expected to generate 0.6 times more return on investment than CaixaBank. However, KBC Group NV is 1.66 times less risky than CaixaBank. It trades about 0.07 of its potential returns per unit of risk. CaixaBank SA is currently generating about -0.04 per unit of risk. If you would invest  7,008  in KBC Group NV on September 23, 2024 and sell it today you would earn a total of  336.00  from holding KBC Group NV or generate 4.79% return on investment over 90 days.

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

KBC Group NV  vs.  CaixaBank SA

KBC Group NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KBC Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CaixaBank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CaixaBank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CaixaBank 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 Group and CaixaBank

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

The idea behind KBC Group NV and CaixaBank SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.