Correlation Between Ally Financial and FinVolution

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

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

Diversification Opportunities for Ally Financial and FinVolution

0.35

Correlation Coefficient

Ally Financial  FinVolution

Weak diversification

The 3 months correlation between Ally and FinVolution is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group and Ally 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 Ally Financial are associated (or correlated) with FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of Ally Financial i.e., Ally Financial and FinVolution go up and down completely randomly.

Pair Corralation between Ally Financial and FinVolution

Given the investment horizon of 90 days Ally Financial is expected to generate 1.1 times less return on investment than FinVolution. In addition to that, Ally Financial is 1.16 times more volatile than FinVolution Group. It trades about 0.05 of its total potential returns per unit of risk. FinVolution Group is currently generating about 0.06 per unit of volatility. If you would invest  483.00  in FinVolution Group on October 4, 2024 and sell it today you would earn a total of  196.00  from holding FinVolution Group or generate 40.58% return on investment over 90 days.

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

Ally Financial  vs.  FinVolution Group

Ally Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Ally Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FinVolution Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FinVolution Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ally Financial and FinVolution

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

The idea behind Ally Financial and FinVolution 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.