Correlation Between Compagnie and ING Groep

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

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

Diversification Opportunities for Compagnie and ING Groep

-0.73

Correlation Coefficient

Compagnie  ING Groep

Pay attention - limited upside

The 3 months correlation between Compagnie and ING is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain 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 Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and ING Groep go up and down completely randomly.

Pair Corralation between Compagnie and ING Groep

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 1.13 times more return on investment than ING Groep. However, Compagnie is 1.13 times more volatile than ING Groep NV. It trades about 0.07 of its potential returns per unit of risk. ING Groep NV is currently generating about -0.16 per unit of risk. If you would invest  8,338  in Compagnie de Saint Gobain on September 20, 2024 and sell it today you would earn a total of  452.00  from holding Compagnie de Saint Gobain or generate 5.42% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  ING Groep NV

Compagnie de Saint

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. 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.

Pair Trading with Compagnie and ING Groep

The main advantage of trading using opposite Compagnie and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie de Saint Gobain 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.