Correlation Between Ally Financial and Qudian

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

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

Diversification Opportunities for Ally Financial and Qudian

0.62

Correlation Coefficient

Ally Financial  Qudian

Poor diversification

The 3 months correlation between Ally and Qudian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc 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 Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of Ally Financial i.e., Ally Financial and Qudian go up and down completely randomly.

Pair Corralation between Ally Financial and Qudian

Given the investment horizon of 90 days Ally Financial is expected to generate 0.4 times more return on investment than Qudian. However, Ally Financial is 2.53 times less risky than Qudian. It trades about -0.24 of its potential returns per unit of risk. Qudian Inc is currently generating about -0.1 per unit of risk. If you would invest  3,855  in Ally Financial on October 11, 2024 and sell it today you would lose (294.00) from holding Ally Financial or give up 7.63% of portfolio value over 90 days.

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

Ally Financial  vs.  Qudian Inc

Ally Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 1 (%) 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.

Qudian Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ally Financial and Qudian

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

The idea behind Ally Financial and Qudian Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.