Correlation Between ING Group and Natwest Group

Can any of the company-specific risk be diversified away by investing in both ING Group and Natwest 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 ING Group and Natwest Group 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 Natwest Group PLC, you can compare the effects of market volatilities on ING Group and Natwest 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 ING Group with a short position of Natwest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ING Group and Natwest Group.

Diversification Opportunities for ING Group and Natwest Group

0.94

Correlation Coefficient

ING Group  Natwest Group

Almost no diversification

The 3 months correlation between ING and Natwest is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ING Group NV and Natwest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natwest Group PLC 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 Natwest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natwest Group PLC has no effect on the direction of ING Group i.e., ING Group and Natwest Group go up and down completely randomly.

Pair Corralation between ING Group and Natwest Group

Considering the 90-day investment horizon ING Group NV is expected to generate 0.88 times more return on investment than Natwest Group. However, ING Group NV is 1.14 times less risky than Natwest Group. It trades about 0.08 of its potential returns per unit of risk. Natwest Group PLC is currently generating about 0.06 per unit of risk. If you would invest  791.00  in ING Group NV on January 31, 2024 and sell it today you would earn a total of  803.00  from holding ING Group NV or generate 101.52% return on investment over 90 days.

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

ING Group NV  vs.  Natwest Group PLC

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 fragile basic indicators, ING Group reported solid returns over the last few months and may actually be approaching a breakup point.

Natwest Group PLC

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Natwest Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ING Group and Natwest Group

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

The idea behind ING Group NV and Natwest Group PLC 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.