Correlation Between AIB Group and Kenmare Resources

Can any of the company-specific risk be diversified away by investing in both AIB Group and Kenmare Resources 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 Kenmare Resources 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 Kenmare Resources PLC, you can compare the effects of market volatilities on AIB Group and Kenmare Resources 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 Kenmare Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIB Group and Kenmare Resources.

Diversification Opportunities for AIB Group and Kenmare Resources

0.48

Correlation Coefficient

AIB Group  Kenmare Resources

Very weak diversification

The 3 months correlation between AIB and Kenmare is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group PLC and Kenmare Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenmare Resources PLC 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 Kenmare Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenmare Resources PLC has no effect on the direction of AIB Group i.e., AIB Group and Kenmare Resources go up and down completely randomly.

Pair Corralation between AIB Group and Kenmare Resources

Assuming the 90 days trading horizon AIB Group is expected to generate 2.29 times less return on investment than Kenmare Resources. But when comparing it to its historical volatility, AIB Group PLC is 2.69 times less risky than Kenmare Resources. It trades about 0.1 of its potential returns per unit of risk. Kenmare Resources PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Kenmare Resources PLC on December 29, 2024 and sell it today you would earn a total of  94.00  from holding Kenmare Resources PLC or generate 24.74% return on investment over 90 days.

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

AIB Group PLC  vs.  Kenmare Resources PLC

AIB Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AIB Group reported solid returns over the last few months and may actually be approaching a breakup point.

Kenmare Resources PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenmare Resources PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kenmare Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIB Group and Kenmare Resources

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

The idea behind AIB Group PLC and Kenmare Resources PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.