Correlation Between Irish Residential and Malin Plc

Can any of the company-specific risk be diversified away by investing in both Irish Residential and Malin Plc 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 Irish Residential and Malin Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Irish Residential Properties and Malin plc, you can compare the effects of market volatilities on Irish Residential and Malin Plc 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 Irish Residential with a short position of Malin Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Irish Residential and Malin Plc.

Diversification Opportunities for Irish Residential and Malin Plc

0.63

Correlation Coefficient

Irish Residential  Malin Plc

Poor diversification

The 3 months correlation between Irish and Malin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Irish Residential Properties and Malin plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malin plc and Irish Residential 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 Irish Residential Properties are associated (or correlated) with Malin Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malin plc has no effect on the direction of Irish Residential i.e., Irish Residential and Malin Plc go up and down completely randomly.

Pair Corralation between Irish Residential and Malin Plc

Assuming the 90 days trading horizon Irish Residential is expected to generate 54.4 times less return on investment than Malin Plc. But when comparing it to its historical volatility, Irish Residential Properties is 3.27 times less risky than Malin Plc. It trades about 0.01 of its potential returns per unit of risk. Malin plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Malin plc on September 22, 2024 and sell it today you would earn a total of  245.00  from holding Malin plc or generate 39.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Irish Residential Properties  vs.  Malin plc

Irish Residential

Risk-Adjusted Performance

0 of 100

Very Weak

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

Malin plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malin plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Malin Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Irish Residential and Malin Plc

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

The idea behind Irish Residential Properties and Malin 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..