Correlation Between European Metals and Alior Bank

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

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

Diversification Opportunities for European Metals and Alior Bank

-0.26

Correlation Coefficient

European Metals  Alior Bank

Very good diversification

The 3 months correlation between European and Alior is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Alior Bank go up and down completely randomly.

Pair Corralation between European Metals and Alior Bank

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Alior Bank. In addition to that, European Metals is 1.57 times more volatile than Alior Bank SA. It trades about -0.08 of its total potential returns per unit of risk. Alior Bank SA is currently generating about 0.01 per unit of volatility. If you would invest  7,946  in Alior Bank SA on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Alior Bank SA or generate 0.05% return on investment over 90 days.

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

European Metals Holdings  vs.  Alior Bank SA

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with European Metals and Alior Bank

The main advantage of trading using opposite European Metals and Alior Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.