Correlation Between KBC Group and Intesa Sanpaolo

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

Diversification Opportunities for KBC Group and Intesa Sanpaolo

0.23

Correlation Coefficient

KBC Group  Intesa Sanpaolo

Modest diversification

The 3 months correlation between KBC and Intesa is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding KBC Group 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 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 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 Group i.e., KBC Group and Intesa Sanpaolo go up and down completely randomly.

Pair Corralation between KBC Group and Intesa Sanpaolo

Assuming the 90 days horizon KBC Group is expected to generate 1.15 times less return on investment than Intesa Sanpaolo. But when comparing it to its historical volatility, KBC Group NV is 1.1 times less risky than Intesa Sanpaolo. It trades about 0.12 of its potential returns per unit of risk. Intesa Sanpaolo SpA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Intesa Sanpaolo SpA on September 23, 2024 and sell it today you would earn a total of  141.00  from holding Intesa Sanpaolo SpA or generate 59.0% return on investment over 90 days.

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

KBC Group NV  vs.  Intesa Sanpaolo SpA

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.

Intesa Sanpaolo SpA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intesa Sanpaolo SpA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Intesa Sanpaolo 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 Intesa Sanpaolo

The main advantage of trading using opposite KBC Group and Intesa Sanpaolo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBC Group 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 Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.