Correlation Between GM and Alior Bank
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Alior Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Alior Bank SA, you can compare the effects of market volatilities on GM 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 GM with a short position of Alior Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Alior Bank.
Diversification Opportunities for GM and Alior Bank
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Alior is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Alior Bank go up and down completely randomly.
Pair Corralation between GM and Alior Bank
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.89 times more return on investment than Alior Bank. However, GM is 1.89 times more volatile than Alior Bank SA. It trades about 0.07 of its potential returns per unit of risk. Alior Bank SA is currently generating about 0.01 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Alior Bank SA
Performance |
| Timeline |
| General Motors |
| Alior Bank SA |
GM and Alior Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Alior Bank
The main advantage of trading using opposite GM and Alior Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Alior Bank vs. HCA Healthcare | Alior Bank vs. X FAB Silicon Foundries | Alior Bank vs. Cairn Homes PLC | Alior Bank vs. Air Products Chemicals |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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