Correlation Between Ally Financial and Morgan Advanced
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Morgan Advanced 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 Morgan Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Morgan Advanced Materials, you can compare the effects of market volatilities on Ally Financial and Morgan Advanced 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 Morgan Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Morgan Advanced.
Diversification Opportunities for Ally Financial and Morgan Advanced
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ally and Morgan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Ally Financial i.e., Ally Financial and Morgan Advanced go up and down completely randomly.
Pair Corralation between Ally Financial and Morgan Advanced
Assuming the 90 days trading horizon Ally Financial is expected to generate 1.55 times more return on investment than Morgan Advanced. However, Ally Financial is 1.55 times more volatile than Morgan Advanced Materials. It trades about 0.06 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about 0.01 per unit of risk. If you would invest 2,629 in Ally Financial on September 2, 2024 and sell it today you would earn a total of 1,365 from holding Ally Financial or generate 51.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Ally Financial vs. Morgan Advanced Materials
Performance |
| Timeline |
| Ally Financial |
| Morgan Advanced Materials |
Ally Financial and Morgan Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Morgan Advanced
The main advantage of trading using opposite Ally Financial and Morgan Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Morgan Advanced 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 Morgan Advanced will offset losses from the drop in Morgan Advanced'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 |
| Morgan Advanced vs. Toyota Motor Corp | Morgan Advanced vs. SoftBank Group Corp | Morgan Advanced vs. Fannie Mae | Morgan Advanced vs. Apple Inc |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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