Correlation Between AIB Group and Penn National

Can any of the company-specific risk be diversified away by investing in both AIB Group and Penn National 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 AIB Group and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIB Group plc and Penn National Gaming, you can compare the effects of market volatilities on AIB Group and Penn National 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 AIB Group with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIB Group and Penn National.

Diversification Opportunities for AIB Group and Penn National

-0.15

Correlation Coefficient

AIB Group  Penn National

Good diversification

The 3 months correlation between AIB and Penn is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group plc and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and AIB Group 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 AIB Group plc are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of AIB Group i.e., AIB Group and Penn National go up and down completely randomly.

Pair Corralation between AIB Group and Penn National

Assuming the 90 days horizon AIB Group plc is expected to generate 0.88 times more return on investment than Penn National. However, AIB Group plc is 1.14 times less risky than Penn National. It trades about 0.15 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.08 per unit of risk. If you would invest  525.00  in AIB Group plc on December 19, 2024 and sell it today you would earn a total of  137.00  from holding AIB Group plc or generate 26.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AIB Group plc  vs.  Penn National Gaming

AIB Group plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AIB Group reported solid returns over the last few months and may actually be approaching a breakup point.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AIB Group and Penn National

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

The idea behind AIB Group plc and Penn National Gaming 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.