Correlation Between Far East and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Far East 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 Far East and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far East Horizon and Ally Financial, you can compare the effects of market volatilities on Far East 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 Far East with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far East and Ally Financial.
Diversification Opportunities for Far East and Ally Financial
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Far and Ally is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Far East Horizon and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Far East 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 Far East Horizon 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 Far East i.e., Far East and Ally Financial go up and down completely randomly.
Pair Corralation between Far East and Ally Financial
Assuming the 90 days horizon Far East Horizon is expected to generate 0.85 times more return on investment than Ally Financial. However, Far East Horizon is 1.18 times less risky than Ally Financial. It trades about 0.15 of its potential returns per unit of risk. Ally Financial is currently generating about 0.06 per unit of risk. If you would invest 56.00 in Far East Horizon on September 26, 2024 and sell it today you would earn a total of 7.00 from holding Far East Horizon or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far East Horizon vs. Ally Financial
Performance |
| Timeline |
| Far East Horizon |
| Ally Financial |
Far East and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far East and Ally Financial
The main advantage of trading using opposite Far East and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far East 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.| Far East vs. Tower One Wireless | Far East vs. ORMAT TECHNOLOGIES | Far East vs. Amkor Technology | Far East vs. Playtech plc |
| 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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