Correlation Between Draper Esprit and AIB Group

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

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

Diversification Opportunities for Draper Esprit and AIB Group

-0.6

Correlation Coefficient

Draper Esprit  AIB Group

Excellent diversification

The 3 months correlation between Draper and AIB is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Draper Esprit 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 Draper Esprit 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 Draper Esprit 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 Draper Esprit i.e., Draper Esprit and AIB Group go up and down completely randomly.

Pair Corralation between Draper Esprit and AIB Group

Assuming the 90 days trading horizon Draper Esprit plc is expected to under-perform the AIB Group. In addition to that, Draper Esprit is 1.13 times more volatile than AIB Group PLC. It trades about -0.37 of its total potential returns per unit of risk. AIB Group PLC is currently generating about 0.05 per unit of volatility. If you would invest  530.00  in AIB Group PLC on September 13, 2024 and sell it today you would earn a total of  8.00  from holding AIB Group PLC or generate 1.51% return on investment over 90 days.

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

Draper Esprit plc  vs.  AIB Group PLC

Draper Esprit plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Draper Esprit plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AIB Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, AIB Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Draper Esprit and AIB Group

The main advantage of trading using opposite Draper Esprit and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Draper Esprit 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 Draper Esprit 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.