Correlation Between Royal Bank and ING Group

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

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

Diversification Opportunities for Royal Bank and ING Group

-0.43

Correlation Coefficient

Royal Bank  ING Group

Very good diversification

The 3 months correlation between Royal and ING is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and ING Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Group NV and Royal Bank 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 Royal Bank of are associated (or correlated) with ING Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Group NV has no effect on the direction of Royal Bank i.e., Royal Bank and ING Group go up and down completely randomly.

Pair Corralation between Royal Bank and ING Group

Allowing for the 90-day total investment horizon Royal Bank of is expected to generate 0.67 times more return on investment than ING Group. However, Royal Bank of is 1.5 times less risky than ING Group. It trades about -0.03 of its potential returns per unit of risk. ING Group NV is currently generating about -0.2 per unit of risk. If you would invest  12,213  in Royal Bank of on September 22, 2024 and sell it today you would lose (241.00) from holding Royal Bank of or give up 1.97% of portfolio value over 90 days.

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

Royal Bank of  vs.  ING Group NV

Royal Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Royal Bank and ING Group

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

The idea behind Royal Bank of and ING Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.