Correlation Between ING Bank and Stalprodukt

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

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

Diversification Opportunities for ING Bank and Stalprodukt

0.85

Correlation Coefficient

ING Bank  Stalprodukt

Very poor diversification

The 3 months correlation between ING and Stalprodukt is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ING Bank lski and Stalprodukt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stalprodukt SA and ING 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 ING Bank lski are associated (or correlated) with Stalprodukt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stalprodukt SA has no effect on the direction of ING Bank i.e., ING Bank and Stalprodukt go up and down completely randomly.

Pair Corralation between ING Bank and Stalprodukt

Assuming the 90 days trading horizon ING Bank is expected to generate 1.06 times less return on investment than Stalprodukt. In addition to that, ING Bank is 1.03 times more volatile than Stalprodukt SA. It trades about 0.21 of its total potential returns per unit of risk. Stalprodukt SA is currently generating about 0.23 per unit of volatility. If you would invest  21,750  in Stalprodukt SA on December 23, 2024 and sell it today you would earn a total of  7,000  from holding Stalprodukt SA or generate 32.18% return on investment over 90 days.

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

ING Bank lski  vs.  Stalprodukt SA

ING Bank lski

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ING Bank lski are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ING Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Stalprodukt SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stalprodukt SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Stalprodukt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ING Bank and Stalprodukt

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

The idea behind ING Bank lski and Stalprodukt SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.