Correlation Between Hoist Finance and Ally Financial

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

By analyzing existing cross correlation between Hoist Finance AB and Ally Financial, you can compare the effects of market volatilities on Hoist Finance and Ally Financial 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 Hoist Finance with a short position of Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoist Finance and Ally Financial.

Diversification Opportunities for Hoist Finance and Ally Financial

0.52

Correlation Coefficient

Hoist Finance  Ally Financial

Very weak diversification

The 3 months correlation between Hoist and Ally is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hoist Finance AB and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Hoist Finance 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 Hoist Finance AB are associated (or correlated) with Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Hoist Finance i.e., Hoist Finance and Ally Financial go up and down completely randomly.

Pair Corralation between Hoist Finance and Ally Financial

Assuming the 90 days horizon Hoist Finance AB is expected to generate 1.2 times more return on investment than Ally Financial. However, Hoist Finance is 1.2 times more volatile than Ally Financial. It trades about 0.04 of its potential returns per unit of risk. Ally Financial is currently generating about -0.01 per unit of risk. If you would invest  799.00  in Hoist Finance AB on September 22, 2024 and sell it today you would earn a total of  12.00  from holding Hoist Finance AB or generate 1.5% return on investment over 90 days.

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

Hoist Finance AB  vs.  Ally Financial

Hoist Finance AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hoist Finance AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hoist Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ally Financial

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Hoist Finance and Ally Financial

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

The idea behind Hoist Finance AB and Ally 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.