Correlation Between Glanbia PLC and AIB Group

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

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

Diversification Opportunities for Glanbia PLC and AIB Group

0.78

Correlation Coefficient

Glanbia PLC  AIB Group

Poor diversification

The 3 months correlation between Glanbia and AIB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Glanbia 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 Glanbia PLC 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 Glanbia 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 Glanbia PLC i.e., Glanbia PLC and AIB Group go up and down completely randomly.

Pair Corralation between Glanbia PLC and AIB Group

Assuming the 90 days trading horizon Glanbia PLC is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, Glanbia PLC is 1.83 times less risky than AIB Group. The stock trades about -0.01 of its potential returns per unit of risk. The AIB Group PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  477.00  in AIB Group PLC on January 31, 2024 and sell it today you would earn a total of  9.00  from holding AIB Group PLC or generate 1.89% return on investment over 90 days.

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

Glanbia PLC  vs.  AIB Group PLC

Glanbia PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Glanbia PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Glanbia PLC may actually be approaching a critical reversion point that can send shares even higher in May 2024.

AIB Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group PLC are ranked lower than 11 (%) 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 Glanbia PLC and AIB Group

The main advantage of trading using opposite Glanbia PLC and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glanbia PLC 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 Glanbia 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.