Correlation Between ING Groep and Novartis

Can any of the company-specific risk be diversified away by investing in both ING Groep and Novartis 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 Novartis 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 Novartis AG, you can compare the effects of market volatilities on ING Groep and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Groep and Novartis.

Diversification Opportunities for ING Groep and Novartis

0.34

Correlation Coefficient

ING Groep  Novartis

Weak diversification

The 3 months correlation between ING and Novartis is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ING Groep NV and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG has no effect on the direction of ING Groep i.e., ING Groep and Novartis go up and down completely randomly.

Pair Corralation between ING Groep and Novartis

Assuming the 90 days trading horizon ING Groep NV is expected to generate 1.46 times more return on investment than Novartis. However, ING Groep is 1.46 times more volatile than Novartis AG. It trades about 0.18 of its potential returns per unit of risk. Novartis AG is currently generating about 0.01 per unit of risk. If you would invest  1,664  in ING Groep NV on April 24, 2025 and sell it today you would earn a total of  291.00  from holding ING Groep NV or generate 17.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

ING Groep NV  vs.  Novartis AG

ING Groep NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ING Groep NV are ranked lower than 14 (%) 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.

Novartis AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novartis AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Novartis is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ING Groep and Novartis

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

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