Correlation Between Ally Financial and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Ally Financial and Norwegian Air 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 Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Norwegian Air Shuttle, you can compare the effects of market volatilities on Ally Financial and Norwegian Air 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 Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Norwegian Air.
Diversification Opportunities for Ally Financial and Norwegian Air
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ally and Norwegian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Ally Financial i.e., Ally Financial and Norwegian Air go up and down completely randomly.
Pair Corralation between Ally Financial and Norwegian Air
Assuming the 90 days horizon Ally Financial is expected to generate 0.9 times more return on investment than Norwegian Air. However, Ally Financial is 1.11 times less risky than Norwegian Air. It trades about 0.23 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.03 per unit of risk. If you would invest 3,431 in Ally Financial on November 7, 2024 and sell it today you would earn a total of 353.00 from holding Ally Financial or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ally Financial vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Ally Financial |
| Norwegian Air Shuttle |
Ally Financial and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Norwegian Air
The main advantage of trading using opposite Ally Financial and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| Ally Financial vs. Scandinavian Tobacco Group | Ally Financial vs. UPDATE SOFTWARE | Ally Financial vs. Beta Systems Software | Ally Financial vs. REVO INSURANCE SPA |
| Norwegian Air vs. Scottish Mortgage Investment | Norwegian Air vs. Guangdong Investment Limited | Norwegian Air vs. SENECA FOODS A | Norwegian Air vs. Austevoll Seafood ASA |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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