Correlation Between Banco Do and KBC Groep

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

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

Diversification Opportunities for Banco Do and KBC Groep

-0.67

Correlation Coefficient

Banco Do  KBC Groep

Excellent diversification

The 3 months correlation between Banco and KBC is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil 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 Banco Do 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 Banco do Brasil 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 Banco Do i.e., Banco Do and KBC Groep go up and down completely randomly.

Pair Corralation between Banco Do and KBC Groep

Assuming the 90 days trading horizon Banco Do is expected to generate 8.15 times less return on investment than KBC Groep. But when comparing it to its historical volatility, Banco do Brasil is 1.2 times less risky than KBC Groep. It trades about 0.01 of its potential returns per unit of risk. KBC Groep NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,090  in KBC Groep NV on March 23, 2025 and sell it today you would earn a total of  1,793  from holding KBC Groep NV or generate 58.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Banco do Brasil  vs.  KBC Groep NV

Banco do Brasil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KBC Groep NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Groep NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, KBC Groep may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Banco Do and KBC Groep

The main advantage of trading using opposite Banco Do and KBC Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do 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 Banco do Brasil 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.