Correlation Between Bankers Investment and Bank of Ireland Group PLC

Can any of the company-specific risk be diversified away by investing in both Bankers Investment and Bank of Ireland Group PLC 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 Bankers Investment and Bank of Ireland Group PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bankers Investment Trust and Bank of Ireland, you can compare the effects of market volatilities on Bankers Investment and Bank of Ireland Group PLC 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 Bankers Investment with a short position of Bank of Ireland Group PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankers Investment and Bank of Ireland Group PLC.

Diversification Opportunities for Bankers Investment and Bank of Ireland Group PLC

-0.08

Correlation Coefficient

Bankers Investment  Bank of Ireland Group PLC

Good diversification

The 3 months correlation between Bankers and Bank is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland Group PLC and Bankers Investment 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 Bankers Investment Trust are associated (or correlated) with Bank of Ireland Group PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland Group PLC has no effect on the direction of Bankers Investment i.e., Bankers Investment and Bank of Ireland Group PLC go up and down completely randomly.

Pair Corralation between Bankers Investment and Bank of Ireland Group PLC

Assuming the 90 days trading horizon Bankers Investment is expected to generate 86.87 times less return on investment than Bank of Ireland Group PLC. But when comparing it to its historical volatility, Bankers Investment Trust is 1.81 times less risky than Bank of Ireland Group PLC. It trades about 0.01 of its potential returns per unit of risk. Bank of Ireland is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  873.00  in Bank of Ireland on December 23, 2024 and sell it today you would earn a total of  287.00  from holding Bank of Ireland or generate 32.88% return on investment over 90 days.

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

Bankers Investment Trust  vs.  Bank of Ireland

Bankers Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bankers Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bank of Ireland Group PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ireland are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bank of Ireland Group PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bankers Investment and Bank of Ireland Group PLC

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

The idea behind Bankers Investment Trust and Bank of Ireland 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.