Correlation Between ING Group and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both ING Group and Wells Fargo 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 Group and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ING Group NV and Wells Fargo, you can compare the effects of market volatilities on ING Group and Wells Fargo 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 Group with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Group and Wells Fargo.
Diversification Opportunities for ING Group and Wells Fargo
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ING and Wells is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and ING Group 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 Group NV are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of ING Group i.e., ING Group and Wells Fargo go up and down completely randomly.
Pair Corralation between ING Group and Wells Fargo
Considering the 90-day investment horizon ING Group NV is expected to under-perform the Wells Fargo. In addition to that, ING Group is 1.41 times more volatile than Wells Fargo. It trades about -0.32 of its total potential returns per unit of risk. Wells Fargo is currently generating about -0.07 per unit of volatility. If you would invest 1,955 in Wells Fargo on August 26, 2024 and sell it today you would lose (31.00) from holding Wells Fargo or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ING Group NV vs. Wells Fargo
Performance |
| Timeline |
| ING Group NV |
| Wells Fargo |
ING Group and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ING Group and Wells Fargo
The main advantage of trading using opposite ING Group and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Group position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| ING Group vs. Natwest Group PLC | ING Group vs. HSBC Holdings PLC | ING Group vs. Banco Santander SA | ING Group vs. UBS Group AG |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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