Correlation Between Alliance Financial and ECM Libra

Can any of the company-specific risk be diversified away by investing in both Alliance Financial and ECM Libra 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 ECM Libra 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 ECM Libra Financial, you can compare the effects of market volatilities on Alliance Financial and ECM Libra 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 ECM Libra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Financial and ECM Libra.

Diversification Opportunities for Alliance Financial and ECM Libra

-0.24

Correlation Coefficient

Alliance Financial  ECM Libra

Very good diversification

The 3 months correlation between Alliance and ECM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and ECM Libra Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECM Libra Financial 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 ECM Libra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECM Libra Financial has no effect on the direction of Alliance Financial i.e., Alliance Financial and ECM Libra go up and down completely randomly.

Pair Corralation between Alliance Financial and ECM Libra

Assuming the 90 days trading horizon Alliance Financial Group is expected to generate 0.43 times more return on investment than ECM Libra. However, Alliance Financial Group is 2.35 times less risky than ECM Libra. It trades about 0.17 of its potential returns per unit of risk. ECM Libra Financial is currently generating about -0.03 per unit of risk. If you would invest  451.00  in Alliance Financial Group on October 23, 2024 and sell it today you would earn a total of  79.00  from holding Alliance Financial Group or generate 17.52% return on investment over 90 days.

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

Alliance Financial Group  vs.  ECM Libra Financial

Alliance Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 13 (%) 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.

ECM Libra Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECM Libra Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ECM Libra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alliance Financial and ECM Libra

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

The idea behind Alliance Financial Group and ECM Libra Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.