Correlation Between Barclays PLC and ING Groep

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

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

Diversification Opportunities for Barclays PLC and ING Groep

0.41

Correlation Coefficient

Barclays PLC  ING Groep

Very weak diversification

The 3 months correlation between Barclays and ING is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC 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 Barclays PLC 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 Barclays PLC 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 Barclays PLC i.e., Barclays PLC and ING Groep go up and down completely randomly.

Pair Corralation between Barclays PLC and ING Groep

Assuming the 90 days horizon Barclays PLC is expected to generate 1.53 times less return on investment than ING Groep. In addition to that, Barclays PLC is 1.73 times more volatile than ING Groep NV. It trades about 0.09 of its total potential returns per unit of risk. ING Groep NV is currently generating about 0.25 per unit of volatility. If you would invest  1,520  in ING Groep NV on December 22, 2024 and sell it today you would earn a total of  415.00  from holding ING Groep NV or generate 27.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.97%
Values	Daily Returns

Barclays PLC  vs.  ING Groep NV

Barclays PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Barclays PLC reported solid returns over the last few months and may actually be approaching a breakup point.

ING Groep NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ING Groep NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ING Groep reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays PLC and ING Groep

The main advantage of trading using opposite Barclays PLC and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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 Barclays PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.