Correlation Between Alliance Global and World Oil

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

Diversification Opportunities for Alliance Global and World Oil

0.85

Correlation Coefficient

Alliance Global  World Oil

Very poor diversification

The 3 months correlation between Alliance and World is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Global Group and World Oil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Oil Group 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 World Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Oil Group has no effect on the direction of Alliance Global i.e., Alliance Global and World Oil go up and down completely randomly.

Pair Corralation between Alliance Global and World Oil

Assuming the 90 days horizon Alliance Global Group is expected to generate 0.59 times more return on investment than World Oil. However, Alliance Global Group is 1.7 times less risky than World Oil. It trades about -0.11 of its potential returns per unit of risk. World Oil Group is currently generating about -0.17 per unit of risk. If you would invest  763.00  in Alliance Global Group on December 29, 2024 and sell it today you would lose (241.00) from holding Alliance Global Group or give up 31.59% of portfolio value over 90 days.

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

Alliance Global Group  vs.  World Oil Group

Alliance Global Group

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

World Oil Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Oil Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Alliance Global and World Oil

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

The idea behind Alliance Global Group and World Oil 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.