Correlation Between Bank of Ireland and Sparebank

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Can any of the company-specific risk be diversified away by investing in both Bank of Ireland and Sparebank 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 Bank of Ireland and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Ireland and Sparebank 1 SR, you can compare the effects of market volatilities on Bank of Ireland and Sparebank 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 Bank of Ireland with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland and Sparebank.

Diversification Opportunities for Bank of Ireland and Sparebank

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Bank and Sparebank is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and Bank of Ireland 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 Bank of Ireland are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Bank of Ireland i.e., Bank of Ireland and Sparebank go up and down completely randomly.

Pair Corralation between Bank of Ireland and Sparebank

Assuming the 90 days trading horizon Bank of Ireland is expected to under-perform the Sparebank. In addition to that, Bank of Ireland is 2.3 times more volatile than Sparebank 1 SR. It trades about -0.09 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.13 per unit of volatility. If you would invest  13,160  in Sparebank 1 SR on September 4, 2024 and sell it today you would earn a total of  1,210  from holding Sparebank 1 SR or generate 9.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bank of Ireland  vs.  Sparebank 1 SR

 Performance 
       Timeline  
Bank of Ireland 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bank of Ireland 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Sparebank 1 SR 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Ireland and Sparebank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of Ireland and Sparebank

The main advantage of trading using opposite Bank of Ireland and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.
The idea behind Bank of Ireland and Sparebank 1 SR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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