Correlation Between ING Group and Royal Bank
Can any of the company-specific risk be diversified away by investing in both ING Group and Royal Bank 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 Royal Bank 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 Royal Bank of, you can compare the effects of market volatilities on ING Group and Royal Bank 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 Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Group and Royal Bank.
Diversification Opportunities for ING Group and Royal Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ING and Royal is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of ING Group i.e., ING Group and Royal Bank go up and down completely randomly.
Pair Corralation between ING Group and Royal Bank
Considering the 90-day investment horizon ING Group NV is expected to generate 1.54 times more return on investment than Royal Bank. However, ING Group is 1.54 times more volatile than Royal Bank of. It trades about 0.05 of its potential returns per unit of risk. Royal Bank of is currently generating about -0.17 per unit of risk. If you would invest 1,581 in ING Group NV on January 20, 2024 and sell it today you would earn a total of 23.00 from holding ING Group NV or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ING Group NV vs. Royal Bank of
Performance |
| Timeline |
| ING Group NV |
| Royal Bank |
ING Group and Royal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ING Group and Royal Bank
The main advantage of trading using opposite ING Group and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Group position performs unexpectedly, Royal Bank 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 Royal Bank will offset losses from the drop in Royal Bank'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 |
| Royal Bank vs. Canadian Imperial Bank | Royal Bank vs. Bank of Montreal | Royal Bank vs. Bank of Nova | Royal Bank 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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