Correlation Between Alior Bank and Europa Metals

Can any of the company-specific risk be diversified away by investing in both Alior Bank and Europa Metals 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 Alior Bank and Europa Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alior Bank SA and Europa Metals, you can compare the effects of market volatilities on Alior Bank and Europa Metals 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 Alior Bank with a short position of Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alior Bank and Europa Metals.

Diversification Opportunities for Alior Bank and Europa Metals

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Correlation Coefficient

Alior Bank  Europa Metals

Pay attention - limited upside

The 3 months correlation between Alior and Europa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alior Bank SA and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Alior Bank 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 Alior Bank SA are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Alior Bank i.e., Alior Bank and Europa Metals go up and down completely randomly.

Pair Corralation between Alior Bank and Europa Metals

Assuming the 90 days trading horizon Alior Bank is expected to generate 2.34 times less return on investment than Europa Metals. But when comparing it to its historical volatility, Alior Bank SA is 1.7 times less risky than Europa Metals. It trades about 0.01 of its potential returns per unit of risk. Europa Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  205.00  in Europa Metals on September 26, 2024 and sell it today you would lose (5.00) from holding Europa Metals or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alior Bank SA  vs.  Europa Metals

Alior Bank SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alior Bank SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alior Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Europa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alior Bank and Europa Metals

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

The idea behind Alior Bank SA and Europa Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.