Correlation Between Premier African and Bank of Ireland

Can any of the company-specific risk be diversified away by investing in both Premier African and Bank of Ireland 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 Premier African and Bank of Ireland into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Premier African Minerals and Bank of Ireland, you can compare the effects of market volatilities on Premier African and Bank of Ireland 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 Premier African with a short position of Bank of Ireland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier African and Bank of Ireland.

Diversification Opportunities for Premier African and Bank of Ireland

0.6

Correlation Coefficient

Premier African  Bank of Ireland

Poor diversification

The 3 months correlation between Premier and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland and Premier African 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 Premier African Minerals are associated (or correlated) with Bank of Ireland. 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 has no effect on the direction of Premier African i.e., Premier African and Bank of Ireland go up and down completely randomly.

Pair Corralation between Premier African and Bank of Ireland

Assuming the 90 days trading horizon Premier African Minerals is expected to generate 6.89 times more return on investment than Bank of Ireland. However, Premier African is 6.89 times more volatile than Bank of Ireland. It trades about 0.14 of its potential returns per unit of risk. Bank of Ireland is currently generating about -0.11 per unit of risk. If you would invest  4.15  in Premier African Minerals on September 2, 2024 and sell it today you would earn a total of  1.30  from holding Premier African Minerals or generate 31.33% return on investment over 90 days.

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

Premier African Minerals  vs.  Bank of Ireland

Premier African Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier African unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Ireland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Premier African and Bank of Ireland

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

The idea behind Premier African Minerals 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.