Correlation Between Mitsubishi UFJ and ING Groep

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

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

Diversification Opportunities for Mitsubishi UFJ and ING Groep

0.25

Correlation Coefficient

Mitsubishi UFJ  ING Groep

Modest diversification

The 3 months correlation between Mitsubishi and ING is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and ING Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Groep NV and Mitsubishi UFJ 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 Mitsubishi UFJ Financial are associated (or correlated) with ING Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Groep NV has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and ING Groep go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and ING Groep

Given the investment horizon of 90 days Mitsubishi UFJ is expected to generate 1.54 times less return on investment than ING Groep. But when comparing it to its historical volatility, Mitsubishi UFJ Financial is 1.07 times less risky than ING Groep. It trades about 0.17 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,520  in ING Groep NV on December 29, 2024 and sell it today you would earn a total of  415.00  from holding ING Groep NV or generate 27.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.52%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  ING Groep NV

Mitsubishi UFJ Financial

Risk-Adjusted Performance

Good

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

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.

Pair Trading with Mitsubishi UFJ and ING Groep

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

The idea behind Mitsubishi UFJ Financial and ING Groep NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.