Correlation Between Bank of Ireland and AIB Group
Can any of the company-specific risk be diversified away by investing in both Bank of Ireland and AIB 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 Bank of Ireland and AIB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Ireland and AIB Group PLC, you can compare the effects of market volatilities on Bank of Ireland and AIB 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 Bank of Ireland with a short position of AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland and AIB Group.
Diversification Opportunities for Bank of Ireland and AIB Group
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and AIB is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and AIB Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group PLC and Bank of Ireland 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 Bank of Ireland are associated (or correlated) with AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group PLC has no effect on the direction of Bank of Ireland i.e., Bank of Ireland and AIB Group go up and down completely randomly.
Pair Corralation between Bank of Ireland and AIB Group
Assuming the 90 days trading horizon Bank of Ireland is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Ireland is 1.1 times less risky than AIB Group. The stock trades about -0.1 of its potential returns per unit of risk. The AIB Group PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 488.00 in AIB Group PLC on August 27, 2024 and sell it today you would earn a total of 32.00 from holding AIB Group PLC or generate 6.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Ireland vs. AIB Group PLC
Performance |
| Timeline |
| Bank of Ireland |
| AIB Group PLC |
Bank of Ireland and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Ireland and AIB Group
The main advantage of trading using opposite Bank of Ireland and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland position performs unexpectedly, AIB 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 AIB Group will offset losses from the drop in AIB Group's long position.| Bank of Ireland vs. Kingspan Group plc | Bank of Ireland vs. Glanbia PLC | Bank of Ireland vs. Ryanair Holdings plc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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