Correlation Between Bank of Ireland and Smurfit Kappa
Can any of the company-specific risk be diversified away by investing in both Bank of Ireland and Smurfit Kappa 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 Bank of Ireland and Smurfit Kappa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Ireland and Smurfit Kappa Group, you can compare the effects of market volatilities on Bank of Ireland and Smurfit Kappa 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 Bank of Ireland with a short position of Smurfit Kappa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ireland and Smurfit Kappa.
Diversification Opportunities for Bank of Ireland and Smurfit Kappa
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Smurfit is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group and Bank of Ireland 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 Bank of Ireland are associated (or correlated) with Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Bank of Ireland i.e., Bank of Ireland and Smurfit Kappa go up and down completely randomly.
Pair Corralation between Bank of Ireland and Smurfit Kappa
Assuming the 90 days trading horizon Bank of Ireland is expected to generate 1.51 times more return on investment than Smurfit Kappa. However, Bank of Ireland is 1.51 times more volatile than Smurfit Kappa Group. It trades about 0.16 of its potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.13 per unit of risk. If you would invest 1,013 in Bank of Ireland on March 5, 2024 and sell it today you would earn a total of 39.00 from holding Bank of Ireland or generate 3.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of Ireland vs. Smurfit Kappa Group
Performance |
Timeline |
Bank of Ireland |
Smurfit Kappa Group |
Bank of Ireland and Smurfit Kappa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of Ireland and Smurfit Kappa
The main advantage of trading using opposite Bank of Ireland and Smurfit Kappa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland position performs unexpectedly, Smurfit Kappa 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 Smurfit Kappa will offset losses from the drop in Smurfit Kappa's long position.Bank of Ireland vs. Glanbia PLC | Bank of Ireland vs. Kingspan Group plc | Bank of Ireland vs. Ryanair Holdings plc |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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