Correlation Between MBank SA and ING Bank

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

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

Diversification Opportunities for MBank SA and ING Bank

0.95

Correlation Coefficient

MBank SA  ING Bank

Almost no diversification

The 3 months correlation between MBank and ING is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and ING Bank lski in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Bank lski and MBank SA 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 mBank SA are associated (or correlated) with ING Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Bank lski has no effect on the direction of MBank SA i.e., MBank SA and ING Bank go up and down completely randomly.

Pair Corralation between MBank SA and ING Bank

Assuming the 90 days trading horizon mBank SA is expected to generate 0.94 times more return on investment than ING Bank. However, mBank SA is 1.07 times less risky than ING Bank. It trades about 0.34 of its potential returns per unit of risk. ING Bank lski is currently generating about 0.23 per unit of risk. If you would invest  54,720  in mBank SA on December 29, 2024 and sell it today you would earn a total of  28,820  from holding mBank SA or generate 52.67% return on investment over 90 days.

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

mBank SA  vs.  ING Bank lski

mBank SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in mBank SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MBank SA reported solid returns over the last few months and may actually be approaching a breakup point.

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 18 (%) 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.

Pair Trading with MBank SA and ING Bank

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

The idea behind mBank SA and ING Bank lski 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.