Correlation Between Chubb and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Chubb 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 Chubb and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chubb and Ally Financial, you can compare the effects of market volatilities on Chubb 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 Chubb with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and Ally Financial.
Diversification Opportunities for Chubb and Ally Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chubb and Ally is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Chubb 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 Chubb 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 Chubb i.e., Chubb and Ally Financial go up and down completely randomly.
Pair Corralation between Chubb and Ally Financial
Allowing for the 90-day total investment horizon Chubb is expected to under-perform the Ally Financial. But the stock apears to be less risky and, when comparing its historical volatility, Chubb is 1.51 times less risky than Ally Financial. The stock trades about -0.07 of its potential returns per unit of risk. The Ally Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,665 in Ally Financial on November 18, 2024 and sell it today you would earn a total of 173.00 from holding Ally Financial or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chubb vs. Ally Financial
Performance |
| Timeline |
| Chubb |
| Ally Financial |
Chubb and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chubb and Ally Financial
The main advantage of trading using opposite Chubb and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb 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.| Chubb vs. Cincinnati Financial | Chubb vs. Aflac Incorporated | Chubb vs. Dover | Chubb vs. Franklin Resources |
| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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