Correlation Between AIB Group and Santander Bank
Can any of the company-specific risk be diversified away by investing in both AIB Group and Santander Bank 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 AIB Group and Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIB Group plc and Santander Bank Polska, you can compare the effects of market volatilities on AIB Group and Santander Bank 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 AIB Group with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIB Group and Santander Bank.
Diversification Opportunities for AIB Group and Santander Bank
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AIB and Santander is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group plc and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and AIB 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 AIB Group plc are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of AIB Group i.e., AIB Group and Santander Bank go up and down completely randomly.
Pair Corralation between AIB Group and Santander Bank
Assuming the 90 days horizon AIB Group is expected to generate 1.98 times less return on investment than Santander Bank. But when comparing it to its historical volatility, AIB Group plc is 1.12 times less risky than Santander Bank. It trades about 0.05 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,903 in Santander Bank Polska on September 3, 2024 and sell it today you would earn a total of 7,227 from holding Santander Bank Polska or generate 248.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIB Group plc vs. Santander Bank Polska
Performance |
| Timeline |
| AIB Group plc |
| Santander Bank Polska |
AIB Group and Santander Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIB Group and Santander Bank
The main advantage of trading using opposite AIB Group and Santander Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIB Group position performs unexpectedly, Santander Bank 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 Santander Bank will offset losses from the drop in Santander Bank's long position.| AIB Group vs. HYATT HOTELS A | AIB Group vs. REGAL HOTEL INTL | AIB Group vs. Hyatt Hotels | AIB Group vs. Computershare Limited |
| Santander Bank vs. Superior Plus Corp | Santander Bank vs. NMI Holdings | Santander Bank vs. Origin Agritech | Santander Bank vs. SIVERS SEMICONDUCTORS AB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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