Correlation Between Ally Financial and FuelCell Energy

Can any of the company-specific risk be diversified away by investing in both Ally Financial and FuelCell Energy 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 FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ally Financial and FuelCell Energy, you can compare the effects of market volatilities on Ally Financial and FuelCell Energy 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and FuelCell Energy.

Diversification Opportunities for Ally Financial and FuelCell Energy

0.13

Correlation Coefficient

Ally Financial  FuelCell Energy

Average diversification

The 3 months correlation between Ally and FuelCell is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Ally Financial i.e., Ally Financial and FuelCell Energy go up and down completely randomly.

Pair Corralation between Ally Financial and FuelCell Energy

Assuming the 90 days trading horizon Ally Financial is expected to generate 0.23 times more return on investment than FuelCell Energy. However, Ally Financial is 4.31 times less risky than FuelCell Energy. It trades about 0.2 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.09 per unit of risk. If you would invest  3,499  in Ally Financial on October 22, 2024 and sell it today you would earn a total of  229.00  from holding Ally Financial or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ally Financial  vs.  FuelCell Energy

Ally Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ally Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FuelCell Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FuelCell Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ally Financial and FuelCell Energy

The main advantage of trading using opposite Ally Financial and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, FuelCell Energy 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 FuelCell Energy will offset losses from the drop in FuelCell Energy's long position.

The idea behind Ally Financial and FuelCell Energy 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.