Correlation Between Ally Financial and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Sovereign Metals 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 Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Sovereign Metals, you can compare the effects of market volatilities on Ally Financial and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Sovereign Metals.
Diversification Opportunities for Ally Financial and Sovereign Metals
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ally and Sovereign is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Ally Financial i.e., Ally Financial and Sovereign Metals go up and down completely randomly.
Pair Corralation between Ally Financial and Sovereign Metals
Assuming the 90 days trading horizon Ally Financial is expected to generate 1.08 times more return on investment than Sovereign Metals. However, Ally Financial is 1.08 times more volatile than Sovereign Metals. It trades about 0.19 of its potential returns per unit of risk. Sovereign Metals 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Sovereign Metals
Performance |
| Timeline |
| Ally Financial |
| Sovereign Metals |
Ally Financial and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Sovereign Metals
The main advantage of trading using opposite Ally Financial and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' 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 |
| Sovereign Metals vs. Hansa Investment | Sovereign Metals vs. TR Property Investment | Sovereign Metals vs. Hilton Food Group | Sovereign Metals vs. Livermore Investments Group |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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