Correlation Between Alliance Global and Alliance Select

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

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

Diversification Opportunities for Alliance Global and Alliance Select

0.54

Correlation Coefficient

Alliance Global  Alliance Select

Very weak diversification

The 3 months correlation between Alliance and Alliance is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Global Group and Alliance Select Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Select Foods and Alliance Global 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 Global Group are associated (or correlated) with Alliance Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Select Foods has no effect on the direction of Alliance Global i.e., Alliance Global and Alliance Select go up and down completely randomly.

Pair Corralation between Alliance Global and Alliance Select

Assuming the 90 days trading horizon Alliance Global Group is expected to generate 0.42 times more return on investment than Alliance Select. However, Alliance Global Group is 2.36 times less risky than Alliance Select. It trades about -0.03 of its potential returns per unit of risk. Alliance Select Foods is currently generating about -0.02 per unit of risk. If you would invest  1,178  in Alliance Global Group on September 25, 2024 and sell it today you would lose (308.00) from holding Alliance Global Group or give up 26.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.14%
Values	Daily Returns

Alliance Global Group  vs.  Alliance Select Foods

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alliance Global and Alliance Select

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

The idea behind Alliance Global Group and Alliance Select Foods 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.