Correlation Between Bed Bath and ING Groep

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Can any of the company-specific risk be diversified away by investing in both Bed Bath and ING Groep 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 Bed Bath and ING Groep into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bed Bath Beyond and ING Groep NV, you can compare the effects of market volatilities on Bed Bath and ING Groep 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 Bed Bath with a short position of ING Groep. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bed Bath and ING Groep.

Diversification Opportunities for Bed Bath and ING Groep

-0.04
  Correlation Coefficient

Good diversification

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

Pair Corralation between Bed Bath and ING Groep

Given the investment horizon of 90 days Bed Bath Beyond is expected to generate about the same return on investment as ING Groep NV. However, Bed Bath is 3.1 times more volatile than ING Groep NV. It trades about 0.01 of its potential returns per unit of risk. ING Groep NV is currently producing about 0.03 per unit of risk. If you would invest  702.00  in ING Groep NV on June 26, 2022 and sell it today you would earn a total of  192.00  from holding ING Groep NV or generate 27.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bed Bath Beyond  vs.  ING Groep NV

 Performance (%) 
       Timeline  
Bed Bath Beyond 
Bed Bath Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Price Channel

ING Groep NV 
ING Groep Performance
0 of 100
Over the last 90 days ING Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ING Groep Price Channel

Bed Bath and ING Groep Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bed Bath and ING Groep

The main advantage of trading using opposite Bed Bath and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath position performs unexpectedly, ING Groep 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 Groep will offset losses from the drop in ING Groep's long position.
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The idea behind Bed Bath Beyond and ING Groep 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.
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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