Correlation Between Alliance Recovery and FTAI Infrastructure

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

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

Diversification Opportunities for Alliance Recovery and FTAI Infrastructure

0.22

Correlation Coefficient

Alliance Recovery  FTAI Infrastructure

Modest diversification

The 3 months correlation between Alliance and FTAI is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Recovery and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure and Alliance Recovery 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 Recovery are associated (or correlated) with FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of Alliance Recovery i.e., Alliance Recovery and FTAI Infrastructure go up and down completely randomly.

Pair Corralation between Alliance Recovery and FTAI Infrastructure

Given the investment horizon of 90 days Alliance Recovery is expected to under-perform the FTAI Infrastructure. In addition to that, Alliance Recovery is 1.34 times more volatile than FTAI Infrastructure. It trades about -0.02 of its total potential returns per unit of risk. FTAI Infrastructure is currently generating about -0.02 per unit of volatility. If you would invest  893.00  in FTAI Infrastructure on September 13, 2024 and sell it today you would lose (53.00) from holding FTAI Infrastructure or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alliance Recovery  vs.  FTAI Infrastructure

Alliance Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alliance Recovery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FTAI Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTAI Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, FTAI Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alliance Recovery and FTAI Infrastructure

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

The idea behind Alliance Recovery and FTAI Infrastructure 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.