Correlation Between US Bancorp and AIB Group
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and AIB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and AIB Group plc, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and AIB Group.
Diversification Opportunities for US Bancorp and AIB Group
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between USB-PH and AIB is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and AIB Group go up and down completely randomly.
Pair Corralation between US Bancorp and AIB Group
Assuming the 90 days trading horizon US Bancorp is expected to generate 0.21 times more return on investment than AIB Group. However, US Bancorp is 4.79 times less risky than AIB Group. It trades about 0.32 of its potential returns per unit of risk. AIB Group plc is currently generating about 0.04 per unit of risk. If you would invest 2,214 in US Bancorp on September 1, 2024 and sell it today you would earn a total of 94.00 from holding US Bancorp or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. AIB Group plc
Performance |
| Timeline |
| US Bancorp |
| AIB Group plc |
US Bancorp and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and AIB Group
The main advantage of trading using opposite US Bancorp and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. US Bancorp PERP | US Bancorp vs. KeyCorp | US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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