Correlation Between Caixabank and Permanent TSB

Can any of the company-specific risk be diversified away by investing in both Caixabank and Permanent TSB 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 Caixabank and Permanent TSB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caixabank SA ADR and Permanent TSB Group, you can compare the effects of market volatilities on Caixabank and Permanent TSB 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 Caixabank with a short position of Permanent TSB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Permanent TSB.

Diversification Opportunities for Caixabank and Permanent TSB

0.24

Correlation Coefficient

Caixabank  Permanent TSB

Modest diversification

The 3 months correlation between Caixabank and Permanent is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR and Permanent TSB Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permanent TSB Group and Caixabank 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 Caixabank SA ADR are associated (or correlated) with Permanent TSB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permanent TSB Group has no effect on the direction of Caixabank i.e., Caixabank and Permanent TSB go up and down completely randomly.

Pair Corralation between Caixabank and Permanent TSB

Assuming the 90 days horizon Caixabank SA ADR is expected to generate 0.82 times more return on investment than Permanent TSB. However, Caixabank SA ADR is 1.21 times less risky than Permanent TSB. It trades about 0.29 of its potential returns per unit of risk. Permanent TSB Group is currently generating about 0.03 per unit of risk. If you would invest  175.00  in Caixabank SA ADR on December 23, 2024 and sell it today you would earn a total of  85.00  from holding Caixabank SA ADR or generate 48.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Caixabank SA ADR  vs.  Permanent TSB Group

Caixabank SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caixabank showed solid returns over the last few months and may actually be approaching a breakup point.

Permanent TSB Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Permanent TSB Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Permanent TSB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caixabank and Permanent TSB

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

The idea behind Caixabank SA ADR and Permanent TSB Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.