Correlation Between AIB Group and Kingspan Group
Can any of the company-specific risk be diversified away by investing in both AIB Group and Kingspan 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 AIB Group and Kingspan Group 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 Kingspan Group plc, you can compare the effects of market volatilities on AIB Group and Kingspan 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 AIB Group with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIB Group and Kingspan Group.
Diversification Opportunities for AIB Group and Kingspan Group
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AIB and Kingspan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group PLC and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of AIB Group i.e., AIB Group and Kingspan Group go up and down completely randomly.
Pair Corralation between AIB Group and Kingspan Group
Assuming the 90 days trading horizon AIB Group PLC is expected to generate 0.95 times more return on investment than Kingspan Group. However, AIB Group PLC is 1.05 times less risky than Kingspan Group. It trades about 0.06 of its potential returns per unit of risk. Kingspan Group plc is currently generating about 0.04 per unit of risk. If you would invest 310.00 in AIB Group PLC on August 28, 2024 and sell it today you would earn a total of 210.00 from holding AIB Group PLC or generate 67.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIB Group PLC vs. Kingspan Group plc
Performance |
| Timeline |
| AIB Group PLC |
| Kingspan Group plc |
AIB Group and Kingspan Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIB Group and Kingspan Group
The main advantage of trading using opposite AIB Group and Kingspan Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIB Group position performs unexpectedly, Kingspan 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 Kingspan Group will offset losses from the drop in Kingspan Group's long position.The idea behind AIB Group PLC and Kingspan 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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