Correlation Between Greencoat Renewables and AIB Group

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

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

Diversification Opportunities for Greencoat Renewables and AIB Group

-0.17

Correlation Coefficient

Greencoat Renewables  AIB Group

Good diversification

The 3 months correlation between Greencoat and AIB is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Greencoat Renewables 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 Greencoat Renewables 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 Greencoat Renewables 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 Greencoat Renewables i.e., Greencoat Renewables and AIB Group go up and down completely randomly.

Pair Corralation between Greencoat Renewables and AIB Group

Assuming the 90 days trading horizon Greencoat Renewables PLC is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, Greencoat Renewables PLC is 1.64 times less risky than AIB Group. The stock trades about -0.02 of its potential returns per unit of risk. The AIB Group PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  236.00  in AIB Group PLC on February 10, 2024 and sell it today you would earn a total of  253.00  from holding AIB Group PLC or generate 107.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Greencoat Renewables PLC  vs.  AIB Group PLC

Greencoat Renewables PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Greencoat Renewables PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Greencoat Renewables may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AIB Group PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIB Group PLC are ranked lower than 13 (%) 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 Greencoat Renewables and AIB Group

The main advantage of trading using opposite Greencoat Renewables and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greencoat Renewables 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 Greencoat Renewables 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.