Correlation Between Noble Financials and Alior Bank

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

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

Diversification Opportunities for Noble Financials and Alior Bank

-0.22

Correlation Coefficient

Noble Financials  Alior Bank

Very good diversification

The 3 months correlation between Noble and Alior is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Noble Financials 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 Noble Financials 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 Noble Financials 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 Noble Financials i.e., Noble Financials and Alior Bank go up and down completely randomly.

Pair Corralation between Noble Financials and Alior Bank

Assuming the 90 days trading horizon Noble Financials SA is expected to under-perform the Alior Bank. In addition to that, Noble Financials is 1.25 times more volatile than Alior Bank SA. It trades about -0.05 of its total potential returns per unit of risk. Alior Bank SA is currently generating about 0.05 per unit of volatility. If you would invest  9,194  in Alior Bank SA on November 28, 2024 and sell it today you would earn a total of  378.00  from holding Alior Bank SA or generate 4.11% return on investment over 90 days.

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

Noble Financials SA  vs.  Alior Bank SA

Noble Financials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Noble Financials SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with Noble Financials and Alior Bank

The main advantage of trading using opposite Noble Financials and Alior Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Financials 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 Noble Financials 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.