Correlation Between ABB and ABN Amro

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

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

Diversification Opportunities for ABB and ABN Amro

0.83

Correlation Coefficient

ABB  ABN Amro

Very poor diversification

The 3 months correlation between ABB and ABN is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ABB and ABN Amro Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN Amro Group and ABB 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 ABB are associated (or correlated) with ABN Amro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN Amro Group has no effect on the direction of ABB i.e., ABB and ABN Amro go up and down completely randomly.

Pair Corralation between ABB and ABN Amro

Assuming the 90 days trading horizon ABB is expected to generate 1.52 times less return on investment than ABN Amro. In addition to that, ABB is 1.31 times more volatile than ABN Amro Group. It trades about 0.18 of its total potential returns per unit of risk. ABN Amro Group is currently generating about 0.36 per unit of volatility. If you would invest  1,759  in ABN Amro Group on April 24, 2025 and sell it today you would earn a total of  658.00  from holding ABN Amro Group or generate 37.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

ABB  vs.  ABN Amro Group

ABB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABB showed solid returns over the last few months and may actually be approaching a breakup point.

ABN Amro Group

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ABN Amro Group are ranked lower than 28 (%) 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.

Pair Trading with ABB and ABN Amro

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

The idea behind ABB and ABN Amro Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..