Correlation Between KBC Groep and Lotus Bakeries
Can any of the company-specific risk be diversified away by investing in both KBC Groep and Lotus Bakeries 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 Lotus Bakeries 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 Lotus Bakeries, you can compare the effects of market volatilities on KBC Groep and Lotus Bakeries 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 Lotus Bakeries. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Groep and Lotus Bakeries.
Diversification Opportunities for KBC Groep and Lotus Bakeries
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KBC and Lotus is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries 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 Lotus Bakeries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Bakeries has no effect on the direction of KBC Groep i.e., KBC Groep and Lotus Bakeries go up and down completely randomly.
Pair Corralation between KBC Groep and Lotus Bakeries
Assuming the 90 days trading horizon KBC Groep is expected to generate 1.84 times less return on investment than Lotus Bakeries. But when comparing it to its historical volatility, KBC Groep NV is 1.16 times less risky than Lotus Bakeries. It trades about 0.05 of its potential returns per unit of risk. Lotus Bakeries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 615,808 in Lotus Bakeries on August 30, 2024 and sell it today you would earn a total of 528,192 from holding Lotus Bakeries or generate 85.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KBC Groep NV vs. Lotus Bakeries
Performance |
| Timeline |
| KBC Groep NV |
| Lotus Bakeries |
KBC Groep and Lotus Bakeries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KBC Groep and Lotus Bakeries
The main advantage of trading using opposite KBC Groep and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBC Groep position performs unexpectedly, Lotus Bakeries 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 Lotus Bakeries will offset losses from the drop in Lotus Bakeries' long position.| KBC Groep vs. ageas SANV | KBC Groep vs. Solvay SA | KBC Groep vs. Etablissementen Franz Colruyt | KBC Groep vs. Groep Brussel Lambert |
| Lotus Bakeries vs. KBC Groep NV | Lotus Bakeries vs. Proximus NV | Lotus Bakeries vs. ageas SANV | Lotus Bakeries vs. Solvay SA |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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