Correlation Between Diamyd Medical and AIB Group

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

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

Diversification Opportunities for Diamyd Medical and AIB Group

0.21

Correlation Coefficient

Diamyd Medical  AIB Group

Modest diversification

The 3 months correlation between Diamyd and AIB is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Diamyd Medical AB 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 Diamyd Medical 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 Diamyd Medical AB 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 Diamyd Medical i.e., Diamyd Medical and AIB Group go up and down completely randomly.

Pair Corralation between Diamyd Medical and AIB Group

Assuming the 90 days horizon Diamyd Medical AB is expected to generate 2.03 times more return on investment than AIB Group. However, Diamyd Medical is 2.03 times more volatile than AIB Group plc. It trades about 0.26 of its potential returns per unit of risk. AIB Group plc is currently generating about 0.02 per unit of risk. If you would invest  120.00  in Diamyd Medical AB on October 4, 2024 and sell it today you would earn a total of  26.00  from holding Diamyd Medical AB or generate 21.67% return on investment over 90 days.

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

Diamyd Medical AB  vs.  AIB Group plc

Diamyd Medical AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamyd Medical AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Diamyd Medical reported solid returns over the last few months and may actually be approaching a breakup point.

AIB Group plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIB Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Diamyd Medical and AIB Group

The main advantage of trading using opposite Diamyd Medical and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamyd Medical 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 Diamyd Medical AB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .