Correlation Between Crazy Woman and AIB Group

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

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

Diversification Opportunities for Crazy Woman and AIB Group

0.4

Correlation Coefficient

Crazy Woman  AIB Group

Very weak diversification

The 3 months correlation between Crazy and AIB is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Crazy Woman Creek and AIB Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group PLC and Crazy Woman 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 Crazy Woman Creek are associated (or correlated) with AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group PLC has no effect on the direction of Crazy Woman i.e., Crazy Woman and AIB Group go up and down completely randomly.

Pair Corralation between Crazy Woman and AIB Group

If you would invest  430.00  in AIB Group PLC on September 20, 2024 and sell it today you would earn a total of  0.00  from holding AIB Group PLC or generate 0.0% return on investment over 90 days.

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

Crazy Woman Creek  vs.  AIB Group PLC

Crazy Woman Creek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crazy Woman Creek has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Crazy Woman is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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. Despite nearly stable basic indicators, AIB Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Crazy Woman and AIB Group

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

The idea behind Crazy Woman Creek and AIB Group PLC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.