Correlation Between Smithson Investment and Bank of Ireland
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Bank of Ireland 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 Smithson Investment and Bank of Ireland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Bank of Ireland, you can compare the effects of market volatilities on Smithson Investment and Bank of Ireland 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 Smithson Investment with a short position of Bank of Ireland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Bank of Ireland.
Diversification Opportunities for Smithson Investment and Bank of Ireland
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Smithson and Bank is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Bank of Ireland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland has no effect on the direction of Smithson Investment i.e., Smithson Investment and Bank of Ireland go up and down completely randomly.
Pair Corralation between Smithson Investment and Bank of Ireland
Assuming the 90 days trading horizon Smithson Investment Trust is expected to under-perform the Bank of Ireland. But the stock apears to be less risky and, when comparing its historical volatility, Smithson Investment Trust is 2.63 times less risky than Bank of Ireland. The stock trades about -0.11 of its potential returns per unit of risk. The Bank of Ireland is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 841.00 in Bank of Ireland on September 24, 2024 and sell it today you would earn a total of 23.00 from holding Bank of Ireland or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. Bank of Ireland
Performance |
| Timeline |
| Smithson Investment Trust |
| Bank of Ireland |
Smithson Investment and Bank of Ireland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Bank of Ireland
The main advantage of trading using opposite Smithson Investment and Bank of Ireland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Bank of Ireland 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 Bank of Ireland will offset losses from the drop in Bank of Ireland's long position.| Smithson Investment vs. Austevoll Seafood ASA | Smithson Investment vs. Cornish Metals | Smithson Investment vs. AMG Advanced Metallurgical | Smithson Investment vs. Axfood AB |
| Bank of Ireland vs. FC Investment Trust | Bank of Ireland vs. Diversified Energy | Bank of Ireland vs. Smithson Investment Trust | Bank of Ireland vs. Kinnevik Investment AB |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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