Correlation Between Barings BDC and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Barings BDC 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 Barings BDC and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings BDC and Ally Financial, you can compare the effects of market volatilities on Barings BDC 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 Barings BDC with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and Ally Financial.
Diversification Opportunities for Barings BDC and Ally Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and Ally is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Ally Financial go up and down completely randomly.
Pair Corralation between Barings BDC and Ally Financial
Given the investment horizon of 90 days Barings BDC is expected to generate 3.99 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Barings BDC is 2.57 times less risky than Ally Financial. It trades about 0.17 of its potential returns per unit of risk. Ally Financial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,576 in Ally Financial on November 2, 2024 and sell it today you would earn a total of 408.00 from holding Ally Financial or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings BDC vs. Ally Financial
Performance |
| Timeline |
| Barings BDC |
| Ally Financial |
Barings BDC and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings BDC and Ally Financial
The main advantage of trading using opposite Barings BDC and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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.| Barings BDC vs. Runway Growth Finance | Barings BDC vs. OneMain Holdings | Barings BDC vs. Navient Corp | Barings BDC vs. Oaktree Specialty Lending |
| Ally Financial vs. American Express | Ally Financial vs. Mastercard | Ally Financial vs. Visa Class A | Ally Financial vs. PayPal Holdings |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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