Correlation Between Industrial and ABN AMRO

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

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

Diversification Opportunities for Industrial and ABN AMRO

0.04

Correlation Coefficient

Industrial  ABN AMRO

Significant diversification

The 3 months correlation between Industrial and ABN is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and ABN AMRO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN AMRO Bank and Industrial 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 Industrial and Commercial are associated (or correlated) with ABN AMRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN AMRO Bank has no effect on the direction of Industrial i.e., Industrial and ABN AMRO go up and down completely randomly.

Pair Corralation between Industrial and ABN AMRO

Assuming the 90 days horizon Industrial and Commercial is expected to under-perform the ABN AMRO. In addition to that, Industrial is 1.37 times more volatile than ABN AMRO Bank. It trades about -0.03 of its total potential returns per unit of risk. ABN AMRO Bank is currently generating about 0.2 per unit of volatility. If you would invest  1,453  in ABN AMRO Bank on February 5, 2024 and sell it today you would earn a total of  221.00  from holding ABN AMRO Bank or generate 15.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Industrial and Commercial  vs.  ABN AMRO Bank

Industrial and Commercial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Industrial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ABN AMRO Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABN AMRO Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent primary indicators, ABN AMRO showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and ABN AMRO

The main advantage of trading using opposite Industrial and ABN AMRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, ABN AMRO 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 ABN AMRO will offset losses from the drop in ABN AMRO's long position.

The idea behind Industrial and Commercial and ABN AMRO Bank 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.