Correlation Between Ally Financial and National Bank

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

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

Diversification Opportunities for Ally Financial and National Bank

0.1

Correlation Coefficient

Ally Financial  National Bank

Average diversification

The 3 months correlation between Ally and National is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Ally Financial i.e., Ally Financial and National Bank go up and down completely randomly.

Pair Corralation between Ally Financial and National Bank

Assuming the 90 days trading horizon Ally Financial is expected to generate 3.92 times less return on investment than National Bank. But when comparing it to its historical volatility, Ally Financial is 2.16 times less risky than National Bank. It trades about 0.04 of its potential returns per unit of risk. National Bank of is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  278.00  in National Bank of on December 2, 2024 and sell it today you would earn a total of  0.00  from holding National Bank of or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ally Financial  vs.  National Bank of

Ally Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ally Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

National Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, National Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ally Financial and National Bank

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

The idea behind Ally Financial and National Bank of 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.