Correlation Between Kingspan Group and Irish Residential

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

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

Diversification Opportunities for Kingspan Group and Irish Residential

0.03

Correlation Coefficient

Kingspan Group  Irish Residential

Significant diversification

The 3 months correlation between Kingspan and Irish is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc and Irish Residential Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irish Residential and Kingspan Group 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 Kingspan Group plc are associated (or correlated) with Irish Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irish Residential has no effect on the direction of Kingspan Group i.e., Kingspan Group and Irish Residential go up and down completely randomly.

Pair Corralation between Kingspan Group and Irish Residential

Assuming the 90 days trading horizon Kingspan Group is expected to generate 1.79 times less return on investment than Irish Residential. In addition to that, Kingspan Group is 1.59 times more volatile than Irish Residential Properties. It trades about 0.05 of its total potential returns per unit of risk. Irish Residential Properties is currently generating about 0.13 per unit of volatility. If you would invest  90.00  in Irish Residential Properties on November 28, 2024 and sell it today you would earn a total of  10.00  from holding Irish Residential Properties or generate 11.11% return on investment over 90 days.

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

Kingspan Group plc  vs.  Irish Residential Properties

Kingspan Group plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kingspan Group may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Irish Residential

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Irish Residential Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Irish Residential may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kingspan Group and Irish Residential

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

The idea behind Kingspan Group plc and Irish Residential Properties 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.