Correlation Between AIB Group and Uniphar Group

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

Diversification Opportunities for AIB Group and Uniphar Group

0.83

Correlation Coefficient

AIB Group  Uniphar Group

Very poor diversification

The 3 months correlation between AIB and Uniphar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group PLC and Uniphar Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniphar Group 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 Uniphar Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniphar Group PLC has no effect on the direction of AIB Group i.e., AIB Group and Uniphar Group go up and down completely randomly.

Pair Corralation between AIB Group and Uniphar Group

Assuming the 90 days trading horizon AIB Group is expected to generate 2.28 times less return on investment than Uniphar Group. But when comparing it to its historical volatility, AIB Group PLC is 1.4 times less risky than Uniphar Group. It trades about 0.1 of its potential returns per unit of risk. Uniphar Group PLC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Uniphar Group PLC on December 29, 2024 and sell it today you would earn a total of  67.00  from holding Uniphar Group PLC or generate 31.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

AIB Group PLC  vs.  Uniphar Group 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.

Uniphar Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Uniphar Group PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Uniphar Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIB Group and Uniphar Group

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

The idea behind AIB Group PLC and Uniphar Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.