Correlation Between ING Group and Citigroup

Can any of the company-specific risk be diversified away by investing in both ING Group and Citigroup 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 Citigroup 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 Citigroup, you can compare the effects of market volatilities on ING Group and Citigroup 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 Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Group and Citigroup.

Diversification Opportunities for ING Group and Citigroup

-0.87

Correlation Coefficient

ING Group  Citigroup

Pay attention - limited upside

The 3 months correlation between ING and Citigroup is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of ING Group i.e., ING Group and Citigroup go up and down completely randomly.

Pair Corralation between ING Group and Citigroup

Considering the 90-day investment horizon ING Group NV is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, ING Group NV is 1.53 times less risky than Citigroup. The stock trades about -0.21 of its potential returns per unit of risk. The Citigroup is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,209  in Citigroup on August 30, 2024 and sell it today you would earn a total of  807.00  from holding Citigroup or generate 13.0% return on investment over 90 days.

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

ING Group NV  vs.  Citigroup

ING Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ING Group and Citigroup

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

The idea behind ING Group NV and Citigroup 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.