Correlation Between ING Groep and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both ING Groep 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 Groep 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 Groep NV and Wells Fargo, you can compare the effects of market volatilities on ING Groep 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 Groep with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Groep and Wells Fargo.
Diversification Opportunities for ING Groep and Wells Fargo
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ING and Wells is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding ING Groep 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 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 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 Groep i.e., ING Groep and Wells Fargo go up and down completely randomly.
Pair Corralation between ING Groep and Wells Fargo
Assuming the 90 days trading horizon ING Groep NV is expected to under-perform the Wells Fargo. But the stock apears to be less risky and, when comparing its historical volatility, ING Groep NV is 3.21 times less risky than Wells Fargo. The stock trades about -0.31 of its potential returns per unit of risk. The Wells Fargo is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 6,029 in Wells Fargo on August 29, 2024 and sell it today you would earn a total of 1,394 from holding Wells Fargo or generate 23.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ING Groep NV vs. Wells Fargo
Performance |
| Timeline |
| ING Groep NV |
| Wells Fargo |
ING Groep and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ING Groep and Wells Fargo
The main advantage of trading using opposite ING Groep and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Groep 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.The idea behind ING Groep NV and Wells Fargo 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.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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