Correlation Between ING Group and Bank of America

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

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

Diversification Opportunities for ING Group and Bank of America

-0.28

Correlation Coefficient

ING Group  Bank of America

Very good diversification

The 3 months correlation between ING and Bank is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and ING Group 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 Group NV are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of ING Group i.e., ING Group and Bank of America go up and down completely randomly.

Pair Corralation between ING Group and Bank of America

Considering the 90-day investment horizon ING Group NV is expected to under-perform the Bank of America. In addition to that, ING Group is 2.52 times more volatile than Bank of America. It trades about -0.17 of its total potential returns per unit of risk. Bank of America is currently generating about 0.14 per unit of volatility. If you would invest  2,349  in Bank of America on September 3, 2024 and sell it today you would earn a total of  109.00  from holding Bank of America or generate 4.64% return on investment over 90 days.

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

ING Group NV  vs.  Bank of America

ING Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Bank of America

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ING Group and Bank of America

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

The idea behind ING Group NV and Bank of America 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.