Correlation Between ING Group and Bank of Montreal

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

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

Diversification Opportunities for ING Group and Bank of Montreal

0.78

Correlation Coefficient

ING Group  Bank of Montreal

Poor diversification

The 3 months correlation between ING and Bank is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and ING Group 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 Group NV are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of ING Group i.e., ING Group and Bank of Montreal go up and down completely randomly.

Pair Corralation between ING Group and Bank of Montreal

Considering the 90-day investment horizon ING Group NV is expected to generate 1.1 times more return on investment than Bank of Montreal. However, ING Group is 1.1 times more volatile than Bank of Montreal. It trades about 0.18 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.14 per unit of risk. If you would invest  1,528  in ING Group NV on November 28, 2024 and sell it today you would earn a total of  221.00  from holding ING Group NV or generate 14.46% return on investment over 90 days.

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

ING Group NV  vs.  Bank of Montreal

ING Group NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ING Group NV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ING Group reported solid returns over the last few months and may actually be approaching a breakup point.

Bank of Montreal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Bank of Montreal may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ING Group and Bank of Montreal

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

The idea behind ING Group NV and Bank of Montreal 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.