Correlation Between HSBC Holdings and ING Group
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and ING Group 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 HSBC Holdings and ING Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and ING Group NV, you can compare the effects of market volatilities on HSBC Holdings and ING Group 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 HSBC Holdings with a short position of ING Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and ING Group.
Diversification Opportunities for HSBC Holdings and ING Group
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and ING is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and ING Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Group NV and HSBC Holdings 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 HSBC Holdings PLC are associated (or correlated) with ING Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Group NV has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and ING Group go up and down completely randomly.
Pair Corralation between HSBC Holdings and ING Group
Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.81 times less return on investment than ING Group. But when comparing it to its historical volatility, HSBC Holdings PLC is 1.07 times less risky than ING Group. It trades about 0.06 of its potential returns per unit of risk. ING Group NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,272 in ING Group NV on January 24, 2024 and sell it today you would earn a total of 369.00 from holding ING Group NV or generate 29.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings PLC vs. ING Group NV
Performance |
| Timeline |
| HSBC Holdings PLC |
| ING Group NV |
HSBC Holdings and ING Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and ING Group
The main advantage of trading using opposite HSBC Holdings and ING Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, ING Group 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 Group will offset losses from the drop in ING Group's long position.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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