Correlation Between International Business and ING Group

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

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

Diversification Opportunities for International Business and ING Group

0.1

Correlation Coefficient

International Business  ING Group

Average diversification

The 3 months correlation between International and ING is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and ING Group go up and down completely randomly.

Pair Corralation between International Business and ING Group

Considering the 90-day investment horizon International Business is expected to generate 1.65 times less return on investment than ING Group. In addition to that, International Business is 1.13 times more volatile than ING Group NV. It trades about 0.09 of its total potential returns per unit of risk. ING Group NV is currently generating about 0.17 per unit of volatility. If you would invest  1,209  in ING Group NV on January 30, 2024 and sell it today you would earn a total of  385.00  from holding ING Group NV or generate 31.84% return on investment over 90 days.

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

International Business Machine  vs.  ING Group NV

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 International Business and ING Group

The main advantage of trading using opposite International Business and ING Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.