Correlation Between TBC Bank and Alfa Financial

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

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

Diversification Opportunities for TBC Bank and Alfa Financial

0.8

Correlation Coefficient

TBC Bank  Alfa Financial

Very poor diversification

The 3 months correlation between TBC and Alfa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TBC Bank Group and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software and TBC Bank 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 TBC Bank Group are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of TBC Bank i.e., TBC Bank and Alfa Financial go up and down completely randomly.

Pair Corralation between TBC Bank and Alfa Financial

Assuming the 90 days trading horizon TBC Bank Group is expected to generate 1.55 times more return on investment than Alfa Financial. However, TBC Bank is 1.55 times more volatile than Alfa Financial Software. It trades about 0.27 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.05 per unit of risk. If you would invest  307,500  in TBC Bank Group on December 22, 2024 and sell it today you would earn a total of  133,500  from holding TBC Bank Group or generate 43.41% return on investment over 90 days.

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

TBC Bank Group  vs.  Alfa Financial Software

TBC Bank Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TBC Bank Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, TBC Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alfa Financial Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TBC Bank and Alfa Financial

The main advantage of trading using opposite TBC Bank and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TBC Bank position performs unexpectedly, Alfa Financial 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 Alfa Financial will offset losses from the drop in Alfa Financial's long position.

The idea behind TBC Bank Group and Alfa Financial Software 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.