Correlation Between Ally Financial and Iron Mountain
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Iron Mountain 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 Iron Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Iron Mountain, you can compare the effects of market volatilities on Ally Financial and Iron Mountain 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 Iron Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Iron Mountain.
Diversification Opportunities for Ally Financial and Iron Mountain
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ally and Iron is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Iron Mountain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Mountain 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 Iron Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Mountain has no effect on the direction of Ally Financial i.e., Ally Financial and Iron Mountain go up and down completely randomly.
Pair Corralation between Ally Financial and Iron Mountain
Assuming the 90 days trading horizon Ally Financial is expected to generate 0.9 times more return on investment than Iron Mountain. However, Ally Financial is 1.12 times less risky than Iron Mountain. It trades about 0.3 of its potential returns per unit of risk. Iron Mountain is currently generating about 0.05 per unit of risk. If you would invest 3,473 in Ally Financial on September 2, 2024 and sell it today you would earn a total of 521.00 from holding Ally Financial or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Iron Mountain
Performance |
| Timeline |
| Ally Financial |
| Iron Mountain |
Ally Financial and Iron Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Iron Mountain
The main advantage of trading using opposite Ally Financial and Iron Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Iron Mountain 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 Iron Mountain will offset losses from the drop in Iron Mountain's long position.| Ally Financial vs. Uniper SE | Ally Financial vs. Mulberry Group PLC | Ally Financial vs. London Security Plc | Ally Financial vs. Triad Group PLC |
| Iron Mountain vs. Uniper SE | Iron Mountain vs. Mulberry Group PLC | Iron Mountain vs. London Security Plc | Iron Mountain vs. Triad Group PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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