Correlation Between Ally Financial and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Coca Cola Co, you can compare the effects of market volatilities on Ally Financial and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Coca Cola.
Diversification Opportunities for Ally Financial and Coca Cola
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ally and Coca is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Coca Cola Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Ally Financial i.e., Ally Financial and Coca Cola go up and down completely randomly.
Pair Corralation between Ally Financial and Coca Cola
Assuming the 90 days trading horizon Ally Financial is expected to generate 1.81 times more return on investment than Coca Cola. However, Ally Financial is 1.81 times more volatile than Coca Cola Co. It trades about 0.12 of its potential returns per unit of risk. Coca Cola Co is currently generating about -0.29 per unit of risk. If you would invest 3,429 in Ally Financial on August 26, 2024 and sell it today you would earn a total of 315.00 from holding Ally Financial or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Coca Cola Co
Performance |
| Timeline |
| Ally Financial |
| Coca Cola |
Ally Financial and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Coca Cola
The main advantage of trading using opposite Ally Financial and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Ally Financial vs. AMG Advanced Metallurgical | Ally Financial vs. Sovereign Metals | Ally Financial vs. Edita Food Industries | Ally Financial vs. Power Metal Resources |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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