Correlation Between Alior Bank and Asseco Business

Can any of the company-specific risk be diversified away by investing in both Alior Bank and Asseco Business 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 Asseco Business 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 Asseco Business Solutions, you can compare the effects of market volatilities on Alior Bank and Asseco Business 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 Asseco Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alior Bank and Asseco Business.

Diversification Opportunities for Alior Bank and Asseco Business

0.6

Correlation Coefficient

Alior Bank  Asseco Business

Poor diversification

The 3 months correlation between Alior and Asseco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alior Bank SA and Asseco Business Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asseco Business Solutions 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 Asseco Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asseco Business Solutions has no effect on the direction of Alior Bank i.e., Alior Bank and Asseco Business go up and down completely randomly.

Pair Corralation between Alior Bank and Asseco Business

Assuming the 90 days trading horizon Alior Bank is expected to generate 2.13 times less return on investment than Asseco Business. In addition to that, Alior Bank is 1.05 times more volatile than Asseco Business Solutions. It trades about 0.14 of its total potential returns per unit of risk. Asseco Business Solutions is currently generating about 0.31 per unit of volatility. If you would invest  6,080  in Asseco Business Solutions on November 28, 2024 and sell it today you would earn a total of  760.00  from holding Asseco Business Solutions or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Alior Bank SA  vs.  Asseco Business Solutions

Alior Bank SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alior Bank SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Alior Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Asseco Business Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asseco Business Solutions are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Asseco Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alior Bank and Asseco Business

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

The idea behind Alior Bank SA and Asseco Business Solutions 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.