Correlation Between Alliance Financial and Sunway Construction

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

Diversification Opportunities for Alliance Financial and Sunway Construction

0.46

Correlation Coefficient

Alliance Financial  Sunway Construction

Very weak diversification

The 3 months correlation between Alliance and Sunway is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and Sunway Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunway Construction 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 Sunway Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunway Construction has no effect on the direction of Alliance Financial i.e., Alliance Financial and Sunway Construction go up and down completely randomly.

Pair Corralation between Alliance Financial and Sunway Construction

Assuming the 90 days trading horizon Alliance Financial is expected to generate 2.93 times less return on investment than Sunway Construction. But when comparing it to its historical volatility, Alliance Financial Group is 2.35 times less risky than Sunway Construction. It trades about 0.2 of its potential returns per unit of risk. Sunway Construction Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  441.00  in Sunway Construction Group on October 12, 2024 and sell it today you would earn a total of  49.00  from holding Sunway Construction Group or generate 11.11% 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.  Sunway Construction Group

Alliance Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 11 (%) 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.

Sunway Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunway Construction Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sunway Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alliance Financial and Sunway Construction

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

The idea behind Alliance Financial Group and Sunway Construction Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.