Correlation Between Metals Exploration and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Metals Exploration 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 Metals Exploration and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metals Exploration Plc and Ally Financial, you can compare the effects of market volatilities on Metals Exploration 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 Metals Exploration with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals Exploration and Ally Financial.
Diversification Opportunities for Metals Exploration and Ally Financial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Metals and Ally is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Ally Financial go up and down completely randomly.
Pair Corralation between Metals Exploration and Ally Financial
Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.71 times more return on investment than Ally Financial. However, Metals Exploration is 1.71 times more volatile than Ally Financial. It trades about 0.09 of its potential returns per unit of risk. Ally Financial is currently generating about 0.06 per unit of risk. If you would invest 210.00 in Metals Exploration Plc on September 3, 2024 and sell it today you would earn a total of 310.00 from holding Metals Exploration Plc or generate 147.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.68% |
| Values | Daily Returns |
Metals Exploration Plc vs. Ally Financial
Performance |
| Timeline |
| Metals Exploration Plc |
| Ally Financial |
Metals Exploration and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metals Exploration and Ally Financial
The main advantage of trading using opposite Metals Exploration and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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.The idea behind Metals Exploration Plc and Ally Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Ally Financial vs. Catalyst Media Group | Ally Financial vs. CATLIN GROUP | Ally Financial vs. RTW Venture Fund | Ally Financial vs. Secure Property Development |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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