Correlation Between Bank of AmericaPFD SER B and ING Groep
Can any of the company-specific risk be diversified away by investing in both Bank of AmericaPFD SER B 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 AmericaPFD SER B 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 AmericaPFD SER B 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 AmericaPFD SER B with a short position of ING Groep. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of AmericaPFD SER B and ING Groep.
Diversification Opportunities for Bank of AmericaPFD SER B and ING Groep
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and ING is -0.55. 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 AmericaPFD SER B 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 AmericaPFD SER B i.e., Bank of AmericaPFD SER B and ING Groep go up and down completely randomly.
Pair Corralation between Bank of AmericaPFD SER B and ING Groep
Assuming the 90 days horizon Bank of America is expected to generate 2.85 times more return on investment than ING Groep. However, Bank of AmericaPFD SER B is 2.85 times more volatile than ING Groep NV. It trades about 0.04 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.05 per unit of risk. If you would invest 20,012 in Bank of America on August 31, 2024 and sell it today you would lose (1,012) from holding Bank of America or give up 5.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 68.9% |
| Values | Daily Returns |
Bank of America vs. ING Groep NV
Performance |
| Timeline |
| Bank of AmericaPFD SER B |
| ING Groep NV |
Bank of AmericaPFD SER B and ING Groep Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of AmericaPFD SER B and ING Groep
The main advantage of trading using opposite Bank of AmericaPFD SER B and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of AmericaPFD SER B 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. Bank of America | ING Groep vs. Citigroup | ING Groep vs. Wells Fargo | ING Groep vs. Toronto Dominion Bank |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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