Correlation Between Territorial Bancorp and Alpha Bank

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

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

Diversification Opportunities for Territorial Bancorp and Alpha Bank

-0.85

Correlation Coefficient

Territorial Bancorp  Alpha Bank

Pay attention - limited upside

The 3 months correlation between Territorial and Alpha is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Alpha Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Bank SA and Territorial Bancorp 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 Territorial Bancorp are associated (or correlated) with Alpha Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Bank SA has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Alpha Bank go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Alpha Bank

Given the investment horizon of 90 days Territorial Bancorp is expected to under-perform the Alpha Bank. But the stock apears to be less risky and, when comparing its historical volatility, Territorial Bancorp is 1.18 times less risky than Alpha Bank. The stock trades about -0.21 of its potential returns per unit of risk. The Alpha Bank SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Alpha Bank SA on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Alpha Bank SA or generate 25.0% return on investment over 90 days.

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

Territorial Bancorp  vs.  Alpha Bank SA

Territorial Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Territorial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Alpha Bank SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Bank SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, Alpha Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Territorial Bancorp and Alpha Bank

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

The idea behind Territorial Bancorp and Alpha 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.