Correlation Between ABN Amro and ING Groep

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

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

Diversification Opportunities for ABN Amro and ING Groep

0.81

Correlation Coefficient

ABN Amro  ING Groep

Very poor diversification

The 3 months correlation between ABN and ING is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ABN Amro Group and ING Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Groep NV and ABN Amro 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 ABN Amro Group are associated (or correlated) with ING Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Groep NV has no effect on the direction of ABN Amro i.e., ABN Amro and ING Groep go up and down completely randomly.

Pair Corralation between ABN Amro and ING Groep

Assuming the 90 days trading horizon ABN Amro Group is expected to under-perform the ING Groep. In addition to that, ABN Amro is 1.32 times more volatile than ING Groep NV. It trades about -0.14 of its total potential returns per unit of risk. ING Groep NV is currently generating about 0.07 per unit of volatility. If you would invest  1,459  in ING Groep NV on February 1, 2024 and sell it today you would earn a total of  27.00  from holding ING Groep NV or generate 1.85% return on investment over 90 days.

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

ABN Amro Group  vs.  ING Groep NV

ABN Amro Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABN Amro Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ABN Amro unveiled solid returns over the last few months and may actually be approaching a breakup point.

ING Groep NV

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ING Groep NV are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ING Groep unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABN Amro and ING Groep

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

The idea behind ABN Amro Group and ING 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.