Correlation Between Koninklijke Ahold and ING Groep

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

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

Diversification Opportunities for Koninklijke Ahold and ING Groep

0.73

Correlation Coefficient

Koninklijke Ahold  ING Groep

Poor diversification

The 3 months correlation between Koninklijke and ING is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize 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 Koninklijke Ahold 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 Koninklijke Ahold Delhaize 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 Koninklijke Ahold i.e., Koninklijke Ahold and ING Groep go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and ING Groep

Assuming the 90 days horizon Koninklijke Ahold is expected to generate 1.81 times less return on investment than ING Groep. But when comparing it to its historical volatility, Koninklijke Ahold Delhaize is 1.73 times less risky than ING Groep. It trades about 0.37 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,462  in ING Groep NV on February 22, 2024 and sell it today you would earn a total of  195.00  from holding ING Groep NV or generate 13.34% return on investment over 90 days.

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

Koninklijke Ahold Delhaize  vs.  ING Groep NV

Koninklijke Ahold

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Koninklijke Ahold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ING Groep NV

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ING Groep NV are ranked lower than 30 (%) 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 Koninklijke Ahold and ING Groep

The main advantage of trading using opposite Koninklijke Ahold and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Ahold 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 Koninklijke Ahold Delhaize 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.