Correlation Between HM Inwest and Alior Bank

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

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

Diversification Opportunities for HM Inwest and Alior Bank

-0.25

Correlation Coefficient

HM Inwest  Alior Bank

Very good diversification

The 3 months correlation between HMI and Alior is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding HM Inwest SA 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 HM Inwest 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 HM Inwest SA 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 HM Inwest i.e., HM Inwest and Alior Bank go up and down completely randomly.

Pair Corralation between HM Inwest and Alior Bank

Assuming the 90 days trading horizon HM Inwest is expected to generate 1.3 times less return on investment than Alior Bank. In addition to that, HM Inwest is 1.36 times more volatile than Alior Bank SA. It trades about 0.02 of its total potential returns per unit of risk. Alior Bank SA is currently generating about 0.04 per unit of volatility. If you would invest  7,480  in Alior Bank SA on September 14, 2024 and sell it today you would earn a total of  1,420  from holding Alior Bank SA or generate 18.98% return on investment over 90 days.

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

HM Inwest SA  vs.  Alior Bank SA

HM Inwest SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HM Inwest SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HM Inwest reported solid returns over the last few months and may actually be approaching a breakup point.

Alior Bank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alior Bank SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with HM Inwest and Alior Bank

The main advantage of trading using opposite HM Inwest and Alior Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HM Inwest 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 HM Inwest SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.