Correlation Between HSBC Holdings and ING Groep

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

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

Diversification Opportunities for HSBC Holdings and ING Groep

-0.84

Correlation Coefficient

HSBC Holdings  ING Groep

Pay attention - limited upside

The 3 months correlation between HSBC and ING is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings 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 HSBC Holdings 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 HSBC Holdings 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 HSBC Holdings i.e., HSBC Holdings and ING Groep go up and down completely randomly.

Pair Corralation between HSBC Holdings and ING Groep

Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.46 times more return on investment than ING Groep. However, HSBC Holdings plc is 2.17 times less risky than ING Groep. It trades about 0.62 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.03 per unit of risk. If you would invest  856.00  in HSBC Holdings plc on September 15, 2024 and sell it today you would earn a total of  73.00  from holding HSBC Holdings plc or generate 8.53% return on investment over 90 days.

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

HSBC Holdings plc  vs.  ING Groep NV

HSBC Holdings plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HSBC Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain 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 HSBC Holdings and ING Groep

The main advantage of trading using opposite HSBC Holdings and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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 HSBC Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.