Correlation Between SM Energy and Bank of Ireland Group PLC

Can any of the company-specific risk be diversified away by investing in both SM Energy and Bank of Ireland Group PLC 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 SM Energy and Bank of Ireland Group PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SM Energy Co and Bank of Ireland, you can compare the effects of market volatilities on SM Energy and Bank of Ireland Group PLC 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 SM Energy with a short position of Bank of Ireland Group PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Bank of Ireland Group PLC.

Diversification Opportunities for SM Energy and Bank of Ireland Group PLC

-0.91

Correlation Coefficient

SM Energy  Bank of Ireland Group PLC

Pay attention - limited upside

The 3 months correlation between 0KZA and Bank is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland Group PLC and SM Energy 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 SM Energy Co are associated (or correlated) with Bank of Ireland Group PLC. 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 Group PLC has no effect on the direction of SM Energy i.e., SM Energy and Bank of Ireland Group PLC go up and down completely randomly.

Pair Corralation between SM Energy and Bank of Ireland Group PLC

Assuming the 90 days trading horizon SM Energy Co is expected to under-perform the Bank of Ireland Group PLC. In addition to that, SM Energy is 1.44 times more volatile than Bank of Ireland. It trades about -0.14 of its total potential returns per unit of risk. Bank of Ireland is currently generating about 0.2 per unit of volatility. If you would invest  864.00  in Bank of Ireland on December 29, 2024 and sell it today you would earn a total of  243.00  from holding Bank of Ireland or generate 28.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

SM Energy Co  vs.  Bank of Ireland

SM Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bank of Ireland Group PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ireland are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bank of Ireland Group PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SM Energy and Bank of Ireland Group PLC

The main advantage of trading using opposite SM Energy and Bank of Ireland Group PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Bank of Ireland Group PLC 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 Group PLC will offset losses from the drop in Bank of Ireland Group PLC's long position.

The idea behind SM Energy Co and Bank of Ireland 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.