Correlation Between KBC Groep and Terns Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both KBC Groep and Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 Terns Pharmaceuticals, you can compare the effects of market volatilities on KBC Groep and Terns Pharmaceuticals 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 Terns Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBC Groep and Terns Pharmaceuticals.

Diversification Opportunities for KBC Groep and Terns Pharmaceuticals

0.39

Correlation Coefficient

KBC Groep  Terns Pharmaceuticals

Weak diversification

The 3 months correlation between KBC and Terns is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding KBC Groep NV and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of KBC Groep i.e., KBC Groep and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between KBC Groep and Terns Pharmaceuticals

Assuming the 90 days horizon KBC Groep is expected to generate 1.36 times less return on investment than Terns Pharmaceuticals. But when comparing it to its historical volatility, KBC Groep NV is 3.25 times less risky than Terns Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  691.00  in Terns Pharmaceuticals on July 21, 2024 and sell it today you would earn a total of  50.00  from holding Terns Pharmaceuticals or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

KBC Groep NV  vs.  Terns Pharmaceuticals

KBC Groep NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBC Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KBC Groep is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Terns Pharmaceuticals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KBC Groep and Terns Pharmaceuticals

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

The idea behind KBC Groep NV and Terns Pharmaceuticals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.