Correlation Between ABN AMRO and Barclays PLC

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

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

Diversification Opportunities for ABN AMRO and Barclays PLC

-0.84

Correlation Coefficient

ABN AMRO  Barclays PLC

Pay attention - limited upside

The 3 months correlation between ABN and Barclays is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding ABN AMRO Bank and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR and ABN AMRO 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 ABN AMRO Bank are associated (or correlated) with Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of ABN AMRO i.e., ABN AMRO and Barclays PLC go up and down completely randomly.

Pair Corralation between ABN AMRO and Barclays PLC

Assuming the 90 days horizon ABN AMRO is expected to generate 2.07 times less return on investment than Barclays PLC. But when comparing it to its historical volatility, ABN AMRO Bank is 1.12 times less risky than Barclays PLC. It trades about 0.03 of its potential returns per unit of risk. Barclays PLC ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  774.00  in Barclays PLC ADR on September 28, 2024 and sell it today you would earn a total of  554.00  from holding Barclays PLC ADR or generate 71.58% return on investment over 90 days.

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

ABN AMRO Bank  vs.  Barclays PLC ADR

ABN AMRO Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABN AMRO Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Barclays PLC ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ABN AMRO and Barclays PLC

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

The idea behind ABN AMRO Bank and Barclays PLC ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..