Correlation Between Ally Financial and Fair Oaks
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Fair Oaks 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 Fair Oaks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Fair Oaks Income, you can compare the effects of market volatilities on Ally Financial and Fair Oaks 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 Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Fair Oaks.
Diversification Opportunities for Ally Financial and Fair Oaks
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ally and Fair is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income 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 Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Ally Financial i.e., Ally Financial and Fair Oaks go up and down completely randomly.
Pair Corralation between Ally Financial and Fair Oaks
Assuming the 90 days trading horizon Ally Financial is expected to generate 4.88 times more return on investment than Fair Oaks. However, Ally Financial is 4.88 times more volatile than Fair Oaks Income. It trades about 0.06 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.13 per unit of risk. If you would invest 2,932 in Ally Financial on September 4, 2024 and sell it today you would earn a total of 969.00 from holding Ally Financial or generate 33.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Fair Oaks Income
Performance |
| Timeline |
| Ally Financial |
| Fair Oaks Income |
Ally Financial and Fair Oaks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Fair Oaks
The main advantage of trading using opposite Ally Financial and Fair Oaks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Fair Oaks 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 Fair Oaks will offset losses from the drop in Fair Oaks' long position.| Ally Financial vs. Beazer Homes USA | Ally Financial vs. Systemair AB | Ally Financial vs. Pets at Home | Ally Financial vs. Ecclesiastical Insurance Office |
| Fair Oaks vs. Erste Group Bank | Fair Oaks vs. Iron Mountain | Fair Oaks vs. Ally Financial | Fair Oaks vs. MT Bank Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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