Correlation Between AIB Group and Plumas Bancorp

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

Diversification Opportunities for AIB Group and Plumas Bancorp

0.04

Correlation Coefficient

AIB Group  Plumas Bancorp

Significant diversification

The 3 months correlation between AIB and Plumas is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AIB Group plc and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas Bancorp 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of AIB Group i.e., AIB Group and Plumas Bancorp go up and down completely randomly.

Pair Corralation between AIB Group and Plumas Bancorp

Assuming the 90 days horizon AIB Group plc is expected to generate 1.35 times more return on investment than Plumas Bancorp. However, AIB Group is 1.35 times more volatile than Plumas Bancorp. It trades about 0.05 of its potential returns per unit of risk. Plumas Bancorp is currently generating about 0.04 per unit of risk. If you would invest  745.00  in AIB Group plc on September 30, 2024 and sell it today you would earn a total of  362.00  from holding AIB Group plc or generate 48.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.87%
Values	Daily Returns

AIB Group plc  vs.  Plumas Bancorp

AIB Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Plumas Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plumas Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Plumas Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIB Group and Plumas Bancorp

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

The idea behind AIB Group plc and Plumas Bancorp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.