Correlation Between Exxon and ING Groep

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

Diversification Opportunities for Exxon and ING Groep

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exxon and ING Groep is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and ING Groep go up and down completely randomly.

Pair Corralation between Exxon and ING Groep

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.85 times more return on investment than ING Groep. However, Exxon Mobil Corp is 1.17 times less risky than ING Groep. It trades about 0.09 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.04 per unit of risk. If you would invest  3,821  in Exxon Mobil Corp on May 10, 2022 and sell it today you would earn a total of  5,080  from holding Exxon Mobil Corp or generate 132.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  ING Groep NV

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Exxon Price Channel

ING Groep NV 
ING Groep Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ING Groep NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ING Groep may actually be approaching a critical reversion point that can send shares even higher in September 2022.

ING Groep Price Channel

Exxon and ING Groep Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and ING Groep

The main advantage of trading using opposite Exxon and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.
The idea behind Exxon Mobil Corp 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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