Correlation Between Kenmare Resources and AIB Group

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

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

Diversification Opportunities for Kenmare Resources and AIB Group

0.45

Correlation Coefficient

Kenmare Resources  AIB Group

Very weak diversification

The 3 months correlation between Kenmare and AIB is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kenmare Resources PLC 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 Kenmare Resources 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 Kenmare Resources PLC 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 Kenmare Resources i.e., Kenmare Resources and AIB Group go up and down completely randomly.

Pair Corralation between Kenmare Resources and AIB Group

Assuming the 90 days trading horizon Kenmare Resources PLC is expected to generate 2.69 times more return on investment than AIB Group. However, Kenmare Resources is 2.69 times more volatile than AIB Group PLC. It trades about 0.09 of its potential returns per unit of risk. AIB Group PLC is currently generating about 0.1 per unit of risk. If you would invest  380.00  in Kenmare Resources PLC on December 29, 2024 and sell it today you would earn a total of  94.00  from holding Kenmare Resources PLC or generate 24.74% return on investment over 90 days.

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

Kenmare Resources PLC  vs.  AIB Group PLC

Kenmare Resources PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kenmare Resources PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kenmare Resources reported solid returns over the last few months and may actually be approaching a breakup point.

AIB Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AIB Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kenmare Resources and AIB Group

The main advantage of trading using opposite Kenmare Resources and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenmare Resources 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 Kenmare Resources PLC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.