Correlation Between Prospect Capital and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Prospect Capital 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 Prospect Capital and Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and Ally Financial, you can compare the effects of market volatilities on Prospect Capital 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 Prospect Capital with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Ally Financial.
Diversification Opportunities for Prospect Capital and Ally Financial
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prospect and Ally is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Prospect Capital 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 Prospect Capital 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 Prospect Capital i.e., Prospect Capital and Ally Financial go up and down completely randomly.
Pair Corralation between Prospect Capital and Ally Financial
Assuming the 90 days trading horizon Prospect Capital is expected to under-perform the Ally Financial. In addition to that, Prospect Capital is 1.04 times more volatile than Ally Financial. It trades about -0.1 of its total potential returns per unit of risk. Ally Financial is currently generating about 0.18 per unit of volatility. If you would invest 3,415 in Ally Financial on August 24, 2024 and sell it today you would earn a total of 304.00 from holding Ally Financial or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. Ally Financial
Performance |
| Timeline |
| Prospect Capital |
| Ally Financial |
Prospect Capital and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and Ally Financial
The main advantage of trading using opposite Prospect Capital and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital 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.| Prospect Capital vs. PennyMac Mortgage Investment | Prospect Capital vs. SiriusPoint | Prospect Capital vs. Telephone and Data | Prospect Capital vs. ARMOUR Residential REIT |
| Ally Financial vs. Small Cap Core | Ally Financial vs. Morningstar Unconstrained Allocation | Ally Financial vs. Mutual Of America | Ally Financial vs. Ep Emerging Markets |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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