Correlation Between Alliance Financial and Aeon Credit

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

Diversification Opportunities for Alliance Financial and Aeon Credit

-0.53

Correlation Coefficient

Alliance Financial  Aeon Credit

Excellent diversification

The 3 months correlation between Alliance and Aeon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service 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 Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of Alliance Financial i.e., Alliance Financial and Aeon Credit go up and down completely randomly.

Pair Corralation between Alliance Financial and Aeon Credit

Assuming the 90 days trading horizon Alliance Financial Group is expected to generate 1.72 times more return on investment than Aeon Credit. However, Alliance Financial is 1.72 times more volatile than Aeon Credit Service. It trades about 0.13 of its potential returns per unit of risk. Aeon Credit Service is currently generating about -0.04 per unit of risk. If you would invest  431.00  in Alliance Financial Group on August 30, 2024 and sell it today you would earn a total of  60.00  from holding Alliance Financial Group or generate 13.92% return on investment over 90 days.

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

Alliance Financial Group  vs.  Aeon Credit Service

Alliance Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 10 (%) 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.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Aeon Credit 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 Aeon Credit

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

The idea behind Alliance Financial Group and Aeon Credit Service 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .