Correlation Between Ally Financial and SK Growth

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

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

Diversification Opportunities for Ally Financial and SK Growth

0.41

Correlation Coefficient

Ally Financial  SK Growth

Very weak diversification

The 3 months correlation between Ally and SKGR is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and SK Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Growth Opportunities 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 SK Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Growth Opportunities has no effect on the direction of Ally Financial i.e., Ally Financial and SK Growth go up and down completely randomly.

Pair Corralation between Ally Financial and SK Growth

Given the investment horizon of 90 days Ally Financial is expected to generate 10.17 times more return on investment than SK Growth. However, Ally Financial is 10.17 times more volatile than SK Growth Opportunities. It trades about 0.03 of its potential returns per unit of risk. SK Growth Opportunities is currently generating about 0.19 per unit of risk. If you would invest  3,490  in Ally Financial on October 7, 2024 and sell it today you would earn a total of  95.00  from holding Ally Financial or generate 2.72% return on investment over 90 days.

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

Ally Financial  vs.  SK Growth Opportunities

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.

SK Growth Opportunities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SK Growth Opportunities are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, SK Growth is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ally Financial and SK Growth

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

The idea behind Ally Financial and SK Growth Opportunities 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.