Correlation Between Sparebank and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Sparebank and Ally Financial 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 Sparebank and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and Ally Financial, you can compare the effects of market volatilities on Sparebank and Ally Financial 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 Sparebank with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Ally Financial.
Diversification Opportunities for Sparebank and Ally Financial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sparebank and Ally is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Sparebank 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 Sparebank 1 SR are associated (or correlated) with Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Sparebank i.e., Sparebank and Ally Financial go up and down completely randomly.
Pair Corralation between Sparebank and Ally Financial
Assuming the 90 days trading horizon Sparebank 1 SR is expected to under-perform the Ally Financial. But the stock apears to be less risky and, when comparing its historical volatility, Sparebank 1 SR is 3.02 times less risky than Ally Financial. The stock trades about -0.04 of its potential returns per unit of risk. The Ally Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,463 in Ally Financial on August 28, 2024 and sell it today you would earn a total of 436.00 from holding Ally Financial or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sparebank 1 SR vs. Ally Financial
Performance |
| Timeline |
| Sparebank 1 SR |
| Ally Financial |
Sparebank and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Ally Financial
The main advantage of trading using opposite Sparebank and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Sparebank vs. Samsung Electronics Co | Sparebank vs. Samsung Electronics Co | Sparebank vs. Hyundai Motor | Sparebank vs. Toyota Motor Corp |
| Ally Financial vs. Schroders Investment Trusts | Ally Financial vs. X FAB Silicon Foundries | Ally Financial vs. Fevertree Drinks Plc | Ally Financial vs. Taylor Maritime Investments |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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