Correlation Between Bank of America and ING Groep
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and ING Groep into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and ING Groep NV, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of ING Groep. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ING Groep.
Diversification Opportunities for Bank of America and ING Groep
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and ING is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and ING Groep go up and down completely randomly.
Pair Corralation between Bank of America and ING Groep
Assuming the 90 days trading horizon Bank of America is expected to generate 0.41 times more return on investment than ING Groep. However, Bank of America is 2.47 times less risky than ING Groep. It trades about -0.1 of its potential returns per unit of risk. ING Groep NV is currently generating about -0.17 per unit of risk. If you would invest 2,179 in Bank of America on August 28, 2024 and sell it today you would lose (47.00) from holding Bank of America or give up 2.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. ING Groep NV
Performance |
| Timeline |
| Bank of America |
| ING Groep NV |
Bank of America and ING Groep Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ING Groep
The main advantage of trading using opposite Bank of America and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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 Bank of America 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.| ING Groep vs. ANZ Group Holdings | ING Groep vs. Agricultural Bank | ING Groep vs. Industrial and Commercial | ING Groep vs. Bank of America |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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