Correlation Between Koninklijke Philips and ABN Amro

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

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

Diversification Opportunities for Koninklijke Philips and ABN Amro

-0.16

Correlation Coefficient

Koninklijke Philips  ABN Amro

Good diversification

The 3 months correlation between Koninklijke and ABN is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV 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 Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and ABN Amro go up and down completely randomly.

Pair Corralation between Koninklijke Philips and ABN Amro

Assuming the 90 days trading horizon Koninklijke Philips NV is expected to under-perform the ABN Amro. But the stock apears to be less risky and, when comparing its historical volatility, Koninklijke Philips NV is 1.02 times less risky than ABN Amro. The stock trades about -0.06 of its potential returns per unit of risk. The ABN Amro Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,858  in ABN Amro Group on April 2, 2025 and sell it today you would earn a total of  466.00  from holding ABN Amro Group or generate 25.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Koninklijke Philips NV  vs.  ABN Amro Group

Koninklijke Philips

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ABN Amro Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABN Amro Group are ranked lower than 15 (%) 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 Koninklijke Philips and ABN Amro

The main advantage of trading using opposite Koninklijke Philips and ABN Amro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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 Koninklijke Philips NV 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.