Correlation Between Bank of Ireland Group PLC and Edita Food
Can any of the company-specific risk be diversified away by investing in both Bank of Ireland Group PLC and Edita Food 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 Group PLC and Edita Food 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 Edita Food Industries, you can compare the effects of market volatilities on Bank of Ireland Group PLC and Edita Food 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 Group PLC with a short position of Edita Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland Group PLC and Edita Food.
Diversification Opportunities for Bank of Ireland Group PLC and Edita Food
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Edita is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries and Bank of Ireland Group PLC 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 Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Bank of Ireland Group PLC i.e., Bank of Ireland Group PLC and Edita Food go up and down completely randomly.
Pair Corralation between Bank of Ireland Group PLC and Edita Food
Assuming the 90 days trading horizon Bank of Ireland is expected to generate 1.5 times more return on investment than Edita Food. However, Bank of Ireland Group PLC is 1.5 times more volatile than Edita Food Industries. It trades about 0.11 of its potential returns per unit of risk. Edita Food Industries is currently generating about 0.09 per unit of risk. If you would invest 903.00 in Bank of Ireland on January 16, 2025 and sell it today you would earn a total of 153.00 from holding Bank of Ireland or generate 16.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Ireland vs. Edita Food Industries
Performance |
| Timeline |
| Bank of Ireland Group PLC |
| Edita Food Industries |
Bank of Ireland Group PLC and Edita Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Ireland Group PLC and Edita Food
The main advantage of trading using opposite Bank of Ireland Group PLC and Edita Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland Group PLC position performs unexpectedly, Edita Food 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 Edita Food will offset losses from the drop in Edita Food's long position.The idea behind Bank of Ireland and Edita Food Industries 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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