Correlation Between BNP Paribas and Alior Bank

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

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

Diversification Opportunities for BNP Paribas and Alior Bank

0.5

Correlation Coefficient

BNP Paribas  Alior Bank

Very weak diversification

The 3 months correlation between BNP and Alior is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas Bank and Alior Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alior Bank SA and BNP Paribas 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 BNP Paribas Bank are associated (or correlated) with Alior Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alior Bank SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and Alior Bank go up and down completely randomly.

Pair Corralation between BNP Paribas and Alior Bank

Assuming the 90 days trading horizon BNP Paribas is expected to generate 1.52 times less return on investment than Alior Bank. But when comparing it to its historical volatility, BNP Paribas Bank is 1.09 times less risky than Alior Bank. It trades about 0.08 of its potential returns per unit of risk. Alior Bank SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,586  in Alior Bank SA on November 19, 2024 and sell it today you would earn a total of  870.00  from holding Alior Bank SA or generate 10.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

BNP Paribas Bank  vs.  Alior Bank SA

BNP Paribas Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BNP Paribas may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Alior Bank SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alior Bank SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Alior Bank may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with BNP Paribas and Alior Bank

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

The idea behind BNP Paribas Bank and Alior Bank SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.