Correlation Between JAPAN AIRLINES and ALIOR BANK

Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES 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 JAPAN AIRLINES and ALIOR BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for JAPAN AIRLINES and ALIOR BANK

0.17

Correlation Coefficient

JAPAN AIRLINES  ALIOR BANK

Average diversification

The 3 months correlation between JAPAN and ALIOR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and ALIOR BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALIOR BANK and JAPAN AIRLINES 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 JAPAN AIRLINES 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 has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and ALIOR BANK go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and ALIOR BANK

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the ALIOR BANK. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 1.93 times less risky than ALIOR BANK. The stock trades about -0.03 of its potential returns per unit of risk. The ALIOR BANK is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  719.00  in ALIOR BANK on October 4, 2024 and sell it today you would earn a total of  1,281  from holding ALIOR BANK or generate 178.16% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  ALIOR BANK

JAPAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ALIOR BANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALIOR BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALIOR BANK is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JAPAN AIRLINES and ALIOR BANK

The main advantage of trading using opposite JAPAN AIRLINES and ALIOR BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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 JAPAN AIRLINES and ALIOR BANK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.