Correlation Between ING Groep and Citigroup

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

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

Diversification Opportunities for ING Groep and Citigroup

0.89

Correlation Coefficient

ING Groep  Citigroup

Very poor diversification

The 3 months correlation between ING and Citigroup is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ING Groep NV and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and ING Groep 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 Groep 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 Groep i.e., ING Groep and Citigroup go up and down completely randomly.

Pair Corralation between ING Groep and Citigroup

Assuming the 90 days trading horizon ING Groep NV is expected to generate 0.65 times more return on investment than Citigroup. However, ING Groep NV is 1.55 times less risky than Citigroup. It trades about 0.24 of its potential returns per unit of risk. Citigroup is currently generating about 0.12 per unit of risk. If you would invest  1,454  in ING Groep NV on December 4, 2024 and sell it today you would earn a total of  260.00  from holding ING Groep NV or generate 17.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

ING Groep NV  vs.  Citigroup

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 18 (%) 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.

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ING Groep and Citigroup

The main advantage of trading using opposite ING Groep and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Groep 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 Groep 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.