Correlation Between Paragon Banking and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Paragon Banking 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 Paragon Banking and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paragon Banking Group and Ally Financial, you can compare the effects of market volatilities on Paragon Banking 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 Paragon Banking with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon Banking and Ally Financial.
Diversification Opportunities for Paragon Banking and Ally Financial
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Paragon and Ally is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Paragon Banking Group and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Paragon Banking 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 Paragon Banking Group 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 Paragon Banking i.e., Paragon Banking and Ally Financial go up and down completely randomly.
Pair Corralation between Paragon Banking and Ally Financial
Assuming the 90 days trading horizon Paragon Banking Group is expected to under-perform the Ally Financial. But the stock apears to be less risky and, when comparing its historical volatility, Paragon Banking Group is 1.23 times less risky than Ally Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Ally Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,159 in Ally Financial on September 26, 2024 and sell it today you would earn a total of 174.00 from holding Ally Financial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paragon Banking Group vs. Ally Financial
Performance |
| Timeline |
| Paragon Banking Group |
| Ally Financial |
Paragon Banking and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paragon Banking and Ally Financial
The main advantage of trading using opposite Paragon Banking and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon Banking 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.| Paragon Banking vs. Far East Horizon | Paragon Banking vs. Walker Dunlop | Paragon Banking vs. Hercules Capital | Paragon Banking vs. DIVERSIFIED ROYALTY |
| Ally Financial vs. Far East Horizon | Ally Financial vs. Walker Dunlop | Ally Financial vs. Paragon Banking Group | Ally Financial vs. Hercules Capital |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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