Correlation Between Ally Financial and Erste Group
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Erste Group Bank, you can compare the effects of market volatilities on Ally Financial and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Erste Group.
Diversification Opportunities for Ally Financial and Erste Group
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ally and Erste is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Ally Financial i.e., Ally Financial and Erste Group go up and down completely randomly.
Pair Corralation between Ally Financial and Erste Group
Assuming the 90 days trading horizon Ally Financial is expected to generate 1.77 times more return on investment than Erste Group. However, Ally Financial is 1.77 times more volatile than Erste Group Bank. It trades about 0.19 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.15 per unit of risk. If you would invest 3,576 in Ally Financial on August 31, 2024 and sell it today you would earn a total of 345.00 from holding Ally Financial or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Erste Group Bank
Performance |
| Timeline |
| Ally Financial |
| Erste Group Bank |
Ally Financial and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Erste Group
The main advantage of trading using opposite Ally Financial and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Ally Financial vs. Wheaton Precious Metals | Ally Financial vs. Solstad Offshore ASA | Ally Financial vs. Coeur Mining | Ally Financial vs. Axway Software SA |
| Erste Group vs. TechnipFMC PLC | Erste Group vs. Microchip Technology | Erste Group vs. Cornish Metals | Erste Group vs. Roper Technologies |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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