Correlation Between ALIOR BANK and National Bank

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

By analyzing existing cross correlation between ALIOR BANK and National Bank Holdings, you can compare the effects of market volatilities on ALIOR BANK and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALIOR BANK and National Bank.

Diversification Opportunities for ALIOR BANK and National Bank

-0.27

Correlation Coefficient

ALIOR BANK  National Bank

Very good diversification

The 3 months correlation between ALIOR and National is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding ALIOR BANK and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of ALIOR BANK i.e., ALIOR BANK and National Bank go up and down completely randomly.

Pair Corralation between ALIOR BANK and National Bank

Assuming the 90 days trading horizon ALIOR BANK is expected to generate 1.08 times more return on investment than National Bank. However, ALIOR BANK is 1.08 times more volatile than National Bank Holdings. It trades about 0.06 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.19 per unit of risk. If you would invest  1,995  in ALIOR BANK on September 22, 2024 and sell it today you would earn a total of  37.00  from holding ALIOR BANK or generate 1.85% return on investment over 90 days.

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

ALIOR BANK  vs.  National Bank Holdings

ALIOR BANK

Risk-Adjusted Performance

0 of 100

Very Weak

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

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ALIOR BANK and National Bank

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

The idea behind ALIOR BANK and National Bank Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.