Correlation Between ING Groep and Solvay SA
Can any of the company-specific risk be diversified away by investing in both ING Groep and Solvay SA 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 Groep and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ING Groep NV and Solvay SA, you can compare the effects of market volatilities on ING Groep and Solvay SA 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 Groep with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Groep and Solvay SA.
Diversification Opportunities for ING Groep and Solvay SA
Very good diversification
The 3 months correlation between ING and Solvay is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ING Groep NV and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and ING Groep 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 Groep NV are associated (or correlated) with Solvay SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay SA has no effect on the direction of ING Groep i.e., ING Groep and Solvay SA go up and down completely randomly.
Pair Corralation between ING Groep and Solvay SA
Assuming the 90 days trading horizon ING Groep NV is expected to generate 0.36 times more return on investment than Solvay SA. However, ING Groep NV is 2.81 times less risky than Solvay SA. It trades about 0.23 of its potential returns per unit of risk. Solvay SA is currently generating about 0.04 per unit of risk. If you would invest 782.00 in ING Groep NV on October 25, 2024 and sell it today you would earn a total of 16.00 from holding ING Groep NV or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ING Groep NV vs. Solvay SA
Performance |
| Timeline |
| ING Groep NV |
| Solvay SA |
ING Groep and Solvay SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ING Groep and Solvay SA
The main advantage of trading using opposite ING Groep and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Groep position performs unexpectedly, Solvay SA 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 Solvay SA will offset losses from the drop in Solvay SA's long position.The idea behind ING Groep NV and Solvay SA 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.| Solvay SA vs. Vastned Retail Belgium | Solvay SA vs. Retail Estates | Solvay SA vs. Shurgard Self Storage | Solvay SA vs. Onward Medical NV |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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