Correlation Between ING Group and East West
Can any of the company-specific risk be diversified away by investing in both ING Group and East West 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 East West 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 East West Bancorp, you can compare the effects of market volatilities on ING Group and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Group and East West.
Diversification Opportunities for ING Group and East West
Poor diversification
The 3 months correlation between ING and East is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp 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 East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of ING Group i.e., ING Group and East West go up and down completely randomly.
Pair Corralation between ING Group and East West
Considering the 90-day investment horizon ING Group NV is expected to generate 0.77 times more return on investment than East West. However, ING Group NV is 1.31 times less risky than East West. It trades about 0.07 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.01 per unit of risk. If you would invest 886.00 in ING Group NV on January 24, 2024 and sell it today you would earn a total of 755.00 from holding ING Group NV or generate 85.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ING Group NV vs. East West Bancorp
Performance |
| Timeline |
| ING Group NV |
| East West Bancorp |
ING Group and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ING Group and East West
The main advantage of trading using opposite ING Group and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ING Group position performs unexpectedly, East West 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 East West will offset losses from the drop in East West'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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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