Correlation Between ING Groep and Banco Bilbao

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

Diversification Opportunities for ING Groep and Banco Bilbao

0.03

Correlation Coefficient

ING Groep  Banco Bilbao

Significant diversification

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

Pair Corralation between ING Groep and Banco Bilbao

Assuming the 90 days horizon ING Groep NV is expected to under-perform the Banco Bilbao. But the pink sheet apears to be less risky and, when comparing its historical volatility, ING Groep NV is 1.55 times less risky than Banco Bilbao. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Banco Bilbao Vizcaya is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,006  in Banco Bilbao Vizcaya on September 4, 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

ING Groep NV  vs.  Banco Bilbao Vizcaya

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.

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.

Pair Trading with ING Groep and Banco Bilbao

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

The idea behind ING Groep NV and Banco Bilbao Vizcaya 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.