Correlation Between Alliance Financial and Cloudpoint Technology

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

By analyzing existing cross correlation between Alliance Financial Group and Cloudpoint Technology Berhad, you can compare the effects of market volatilities on Alliance Financial and Cloudpoint Technology 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 Alliance Financial with a short position of Cloudpoint Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Financial and Cloudpoint Technology.

Diversification Opportunities for Alliance Financial and Cloudpoint Technology

0.55

Correlation Coefficient

Alliance Financial  Cloudpoint Technology

Very weak diversification

The 3 months correlation between Alliance and Cloudpoint is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and Cloudpoint Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudpoint Technology and Alliance 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 Alliance Financial Group are associated (or correlated) with Cloudpoint Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudpoint Technology has no effect on the direction of Alliance Financial i.e., Alliance Financial and Cloudpoint Technology go up and down completely randomly.

Pair Corralation between Alliance Financial and Cloudpoint Technology

Assuming the 90 days trading horizon Alliance Financial Group is expected to generate 0.67 times more return on investment than Cloudpoint Technology. However, Alliance Financial Group is 1.5 times less risky than Cloudpoint Technology. It trades about 0.18 of its potential returns per unit of risk. Cloudpoint Technology Berhad is currently generating about 0.06 per unit of risk. If you would invest  427.00  in Alliance Financial Group on October 11, 2024 and sell it today you would earn a total of  77.00  from holding Alliance Financial Group or generate 18.03% return on investment over 90 days.

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

Alliance Financial Group  vs.  Cloudpoint Technology Berhad

Alliance Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cloudpoint Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudpoint Technology Berhad are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Cloudpoint Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alliance Financial and Cloudpoint Technology

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

The idea behind Alliance Financial Group and Cloudpoint Technology Berhad 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..