Correlation Between Ally Financial and Air Products
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Air Products 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 Ally Financial and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Air Products Chemicals, you can compare the effects of market volatilities on Ally Financial and Air Products 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 Ally Financial with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Air Products.
Diversification Opportunities for Ally Financial and Air Products
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ally and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Ally Financial 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 Ally Financial are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Ally Financial i.e., Ally Financial and Air Products go up and down completely randomly.
Pair Corralation between Ally Financial and Air Products
Assuming the 90 days trading horizon Ally Financial is expected to generate 3.3 times less return on investment than Air Products. But when comparing it to its historical volatility, Ally Financial is 3.13 times less risky than Air Products. It trades about 0.04 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 26,465 in Air Products Chemicals on September 12, 2024 and sell it today you would earn a total of 4,753 from holding Air Products Chemicals or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Air Products Chemicals
Performance |
| Timeline |
| Ally Financial |
| Air Products Chemicals |
Ally Financial and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Air Products
The main advantage of trading using opposite Ally Financial and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Ally Financial vs. Deltex Medical Group | Ally Financial vs. Playtech Plc | Ally Financial vs. United States Steel | Ally Financial vs. Blackstone Loan Financing |
| Air Products vs. Oakley Capital Investments | Air Products vs. Aurora Investment Trust | Air Products vs. New Residential Investment | Air Products vs. Liontrust Asset Management |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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