Correlation Between Bank of Montreal and ING Group

Can any of the company-specific risk be diversified away by investing in both Bank of Montreal 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 Bank of Montreal and ING Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Montreal and ING Group NV, you can compare the effects of market volatilities on Bank of Montreal 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 Bank of Montreal with a short position of ING Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and ING Group.

Diversification Opportunities for Bank of Montreal and ING Group

0.49

Correlation Coefficient

Bank of Montreal  ING Group

Very weak diversification

The 3 months correlation between Bank and ING is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal i.e., Bank of Montreal and ING Group go up and down completely randomly.

Pair Corralation between Bank of Montreal and ING Group

Considering the 90-day investment horizon Bank of Montreal is expected to under-perform the ING Group. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Montreal is 1.58 times less risky than ING Group. The stock trades about -0.34 of its potential returns per unit of risk. The ING Group NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,568  in ING Group NV on January 28, 2024 and sell it today you would earn a total of  26.00  from holding ING Group NV or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of Montreal  vs.  ING Group NV

Bank of Montreal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Bank of Montreal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ING Group NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ING Group NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, ING Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and ING Group

The main advantage of trading using opposite Bank of Montreal and ING Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal 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.

The idea behind Bank of Montreal and ING Group NV 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.