Correlation Between Banco Bilbao and ING Groep

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

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

Diversification Opportunities for Banco Bilbao and ING Groep

0.03

Correlation Coefficient

Banco Bilbao  ING Groep

Significant diversification

The 3 months correlation between Banco and ING is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya and ING Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Groep NV and Banco Bilbao 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 Banco Bilbao Vizcaya are associated (or correlated) with ING Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Groep NV has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and ING Groep go up and down completely randomly.

Pair Corralation between Banco Bilbao and ING Groep

Assuming the 90 days horizon Banco Bilbao Vizcaya is expected to generate 1.55 times more return on investment than ING Groep. However, Banco Bilbao is 1.55 times more volatile than ING Groep NV. It trades about -0.05 of its potential returns per unit of risk. ING Groep NV is currently generating about -0.14 per unit of risk. If you would invest  1,006  in Banco Bilbao Vizcaya on September 3, 2024 and sell it today you would lose (92.00) from holding Banco Bilbao Vizcaya or give up 9.15% of portfolio value over 90 days.

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

Banco Bilbao Vizcaya  vs.  ING Groep NV

Banco Bilbao Vizcaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Vizcaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ING Groep NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Banco Bilbao and ING Groep

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

The idea behind Banco Bilbao Vizcaya and ING Groep 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.