Correlation Between IMC SA and Alior Bank

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

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

Diversification Opportunities for IMC SA and Alior Bank

0.87

Correlation Coefficient

IMC SA  Alior Bank

Very poor diversification

The 3 months correlation between IMC and Alior is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IMC 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 IMC SA 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 IMC 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 IMC SA i.e., IMC SA and Alior Bank go up and down completely randomly.

Pair Corralation between IMC SA and Alior Bank

Assuming the 90 days trading horizon IMC SA is expected to generate 2.89 times more return on investment than Alior Bank. However, IMC SA is 2.89 times more volatile than Alior Bank SA. It trades about 0.21 of its potential returns per unit of risk. Alior Bank SA is currently generating about 0.24 per unit of risk. If you would invest  1,610  in IMC SA on December 29, 2024 and sell it today you would earn a total of  1,870  from holding IMC SA or generate 116.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

IMC SA  vs.  Alior Bank SA

IMC SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMC SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IMC SA reported solid returns over the last few months and may actually be approaching a breakup point.

Alior Bank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alior Bank SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Alior Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMC SA and Alior Bank

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

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.