Correlation Between Bank of Ireland and Kingspan Group
Can any of the company-specific risk be diversified away by investing in both Bank of Ireland 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 Bank of Ireland and Kingspan 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 Kingspan Group plc, you can compare the effects of market volatilities on Bank of Ireland 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 Bank of Ireland with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland and Kingspan Group.
Diversification Opportunities for Bank of Ireland and Kingspan Group
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Kingspan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland 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 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 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 Bank of Ireland i.e., Bank of Ireland and Kingspan Group go up and down completely randomly.
Pair Corralation between Bank of Ireland and Kingspan Group
Assuming the 90 days trading horizon Bank of Ireland is expected to generate 1.0 times more return on investment than Kingspan Group. However, Bank of Ireland is 1.0 times less risky than Kingspan Group. It trades about -0.09 of its potential returns per unit of risk. Kingspan Group plc is currently generating about -0.16 per unit of risk. If you would invest 880.00 in Bank of Ireland on August 28, 2024 and sell it today you would lose (39.00) from holding Bank of Ireland or give up 4.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Ireland vs. Kingspan Group plc
Performance |
| Timeline |
| Bank of Ireland |
| Kingspan Group plc |
Bank of Ireland and Kingspan Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Ireland and Kingspan Group
The main advantage of trading using opposite Bank of Ireland and Kingspan Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland 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.| Bank of Ireland vs. AIB Group PLC | Bank of Ireland vs. Kingspan Group plc | Bank of Ireland vs. Glanbia PLC | Bank of Ireland vs. Ryanair Holdings plc |
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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 the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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