Correlation Between UCB SA and KBC Groep

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

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

Diversification Opportunities for UCB SA and KBC Groep

0.13

Correlation Coefficient

UCB SA  KBC Groep

Average diversification

The 3 months correlation between UCB and KBC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and KBC Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Groep NV and UCB SA 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 UCB SA are associated (or correlated) with KBC Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Groep NV has no effect on the direction of UCB SA i.e., UCB SA and KBC Groep go up and down completely randomly.

Pair Corralation between UCB SA and KBC Groep

Assuming the 90 days trading horizon UCB SA is expected to generate 1.45 times more return on investment than KBC Groep. However, UCB SA is 1.45 times more volatile than KBC Groep NV. It trades about 0.13 of its potential returns per unit of risk. KBC Groep NV is currently generating about 0.07 per unit of risk. If you would invest  16,340  in UCB SA on September 22, 2024 and sell it today you would earn a total of  2,320  from holding UCB SA or generate 14.2% return on investment over 90 days.

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

UCB SA  vs.  KBC Groep NV

UCB SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, UCB SA reported solid returns over the last few months and may actually be approaching a breakup point.

KBC Groep NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, KBC Groep is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with UCB SA and KBC Groep

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

The idea behind UCB SA and KBC Groep NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.