Correlation Between Bank of Ireland and Royal Bank
Can any of the company-specific risk be diversified away by investing in both Bank of Ireland and Royal 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 Bank of Ireland and Royal Bank 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 Royal Bank of, you can compare the effects of market volatilities on Bank of Ireland and Royal 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 Bank of Ireland with a short position of Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland and Royal Bank.
Diversification Opportunities for Bank of Ireland and Royal Bank
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Royal is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Bank of Ireland i.e., Bank of Ireland and Royal Bank go up and down completely randomly.
Pair Corralation between Bank of Ireland and Royal Bank
Assuming the 90 days trading horizon Bank of Ireland is expected to generate 2.71 times less return on investment than Royal Bank. In addition to that, Bank of Ireland is 1.4 times more volatile than Royal Bank of. It trades about 0.01 of its total potential returns per unit of risk. Royal Bank of is currently generating about 0.05 per unit of volatility. If you would invest 9,168 in Royal Bank of on September 3, 2024 and sell it today you would earn a total of 3,385 from holding Royal Bank of or generate 36.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.37% |
| Values | Daily Returns |
Bank of Ireland vs. Royal Bank of
Performance |
| Timeline |
| Bank of Ireland |
| Royal Bank |
Bank of Ireland and Royal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Ireland and Royal Bank
The main advantage of trading using opposite Bank of Ireland and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland position performs unexpectedly, Royal 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 Royal Bank will offset losses from the drop in Royal Bank's long position.| Bank of Ireland vs. Ally Financial | Bank of Ireland vs. iShares Physical Silver | Bank of Ireland vs. Greenroc Mining PLC | Bank of Ireland vs. Lundin Mining Corp |
| Royal Bank vs. Ecclesiastical Insurance Office | Royal Bank vs. Trainline Plc | Royal Bank vs. United Utilities Group | Royal Bank vs. Sabre Insurance Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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