Correlation Between Ally Financial and Athelney Trust

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

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

Diversification Opportunities for Ally Financial and Athelney Trust

0.42

Correlation Coefficient

Ally Financial  Athelney Trust

Very weak diversification

The 3 months correlation between Ally and Athelney is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Athelney Trust plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athelney Trust plc 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 Athelney Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athelney Trust plc has no effect on the direction of Ally Financial i.e., Ally Financial and Athelney Trust go up and down completely randomly.

Pair Corralation between Ally Financial and Athelney Trust

Assuming the 90 days trading horizon Ally Financial is expected to under-perform the Athelney Trust. In addition to that, Ally Financial is 1.08 times more volatile than Athelney Trust plc. It trades about -0.36 of its total potential returns per unit of risk. Athelney Trust plc is currently generating about 0.24 per unit of volatility. If you would invest  17,500  in Athelney Trust plc on October 8, 2024 and sell it today you would earn a total of  1,000.00  from holding Athelney Trust plc or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Ally Financial  vs.  Athelney Trust plc

Ally Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ally Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Athelney Trust plc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Athelney Trust plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Athelney Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ally Financial and Athelney Trust

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

The idea behind Ally Financial and Athelney Trust plc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.