Correlation Between Barclays PLC and ING Group

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

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

Diversification Opportunities for Barclays PLC and ING Group

0.91

Correlation Coefficient

Barclays PLC  ING Group

Almost no diversification

The 3 months correlation between Barclays and ING is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and ING Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Group NV and Barclays PLC 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 Barclays PLC ADR are associated (or correlated) with ING Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Group NV has no effect on the direction of Barclays PLC i.e., Barclays PLC and ING Group go up and down completely randomly.

Pair Corralation between Barclays PLC and ING Group

Considering the 90-day investment horizon Barclays PLC ADR is expected to generate 1.38 times more return on investment than ING Group. However, Barclays PLC is 1.38 times more volatile than ING Group NV. It trades about 0.26 of its potential returns per unit of risk. ING Group NV is currently generating about 0.07 per unit of risk. If you would invest  929.00  in Barclays PLC ADR on January 29, 2024 and sell it today you would earn a total of  113.00  from holding Barclays PLC ADR or generate 12.16% return on investment over 90 days.

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

Barclays PLC ADR  vs.  ING Group NV

Barclays PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Barclays PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

ING Group NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ING Group NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ING Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays PLC and ING Group

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

The idea behind Barclays PLC ADR and ING Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.