Correlation Between ING Groep and Holland Colours

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

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

Diversification Opportunities for ING Groep and Holland Colours

0.62

Correlation Coefficient

ING Groep  Holland Colours

Poor diversification

The 3 months correlation between ING and Holland is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ING Groep NV and Holland Colours NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holland Colours NV and ING Groep 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 ING Groep NV are associated (or correlated) with Holland Colours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holland Colours NV has no effect on the direction of ING Groep i.e., ING Groep and Holland Colours go up and down completely randomly.

Pair Corralation between ING Groep and Holland Colours

Assuming the 90 days trading horizon ING Groep NV is expected to generate 0.86 times more return on investment than Holland Colours. However, ING Groep NV is 1.16 times less risky than Holland Colours. It trades about 0.09 of its potential returns per unit of risk. Holland Colours NV is currently generating about -0.03 per unit of risk. If you would invest  813.00  in ING Groep NV on February 4, 2024 and sell it today you would earn a total of  777.00  from holding ING Groep NV or generate 95.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.03%
Values	Daily Returns

ING Groep NV  vs.  Holland Colours NV

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.

Holland Colours NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holland Colours NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Holland Colours may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ING Groep and Holland Colours

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

The idea behind ING Groep NV and Holland Colours 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.