Correlation Between Ally Financial and Far East
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Far East 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 Ally Financial and Far East into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Far East Horizon, you can compare the effects of market volatilities on Ally Financial and Far East 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 Ally Financial with a short position of Far East. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Far East.
Diversification Opportunities for Ally Financial and Far East
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ally and Far is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Far East Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Horizon and Ally Financial 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 Ally Financial are associated (or correlated) with Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Horizon has no effect on the direction of Ally Financial i.e., Ally Financial and Far East go up and down completely randomly.
Pair Corralation between Ally Financial and Far East
Assuming the 90 days horizon Ally Financial is expected to under-perform the Far East. But the stock apears to be less risky and, when comparing its historical volatility, Ally Financial is 3.44 times less risky than Far East. The stock trades about -0.01 of its potential returns per unit of risk. The Far East Horizon is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Far East Horizon on September 26, 2024 and sell it today you would earn a total of 37.00 from holding Far East Horizon or generate 142.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Far East Horizon
Performance |
| Timeline |
| Ally Financial |
| Far East Horizon |
Ally Financial and Far East Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Far East
The main advantage of trading using opposite Ally Financial and Far East positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Far East 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 Far East will offset losses from the drop in Far East's long position.| Ally Financial vs. Far East Horizon | Ally Financial vs. Walker Dunlop | Ally Financial vs. Paragon Banking Group | Ally Financial vs. Hercules Capital |
| Far East vs. Tower One Wireless | Far East vs. ORMAT TECHNOLOGIES | Far East vs. Amkor Technology | Far East vs. Playtech plc |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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