Correlation Between Central Asia and Bank of Ireland Group PLC

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

Diversification Opportunities for Central Asia and Bank of Ireland Group PLC

-0.35

Correlation Coefficient

Central Asia  Bank of Ireland Group PLC

Very good diversification

The 3 months correlation between Central and Bank is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals 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 Central Asia 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 Central Asia Metals 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 Central Asia i.e., Central Asia and Bank of Ireland Group PLC go up and down completely randomly.

Pair Corralation between Central Asia and Bank of Ireland Group PLC

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Bank of Ireland Group PLC. But the stock apears to be less risky and, when comparing its historical volatility, Central Asia Metals is 1.06 times less risky than Bank of Ireland Group PLC. The stock trades about -0.05 of its potential returns per unit of risk. The Bank of Ireland is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  826.00  in Bank of Ireland on December 1, 2024 and sell it today you would earn a total of  316.00  from holding Bank of Ireland or generate 38.26% return on investment over 90 days.

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

Central Asia Metals  vs.  Bank of Ireland

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia 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 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady 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 Central Asia and Bank of Ireland Group PLC

The main advantage of trading using opposite Central Asia and Bank of Ireland Group PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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 Central Asia Metals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.