Correlation Between BANK CENTRAL and Ally Financial

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

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

Diversification Opportunities for BANK CENTRAL and Ally Financial

-0.65

Correlation Coefficient

BANK CENTRAL  Ally Financial

Excellent diversification

The 3 months correlation between BANK and Ally is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and BANK CENTRAL 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 BANK CENTRAL ASIA are associated (or correlated) with Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of BANK CENTRAL i.e., BANK CENTRAL and Ally Financial go up and down completely randomly.

Pair Corralation between BANK CENTRAL and Ally Financial

Assuming the 90 days trading horizon BANK CENTRAL ASIA is expected to generate 0.23 times more return on investment than Ally Financial. However, BANK CENTRAL ASIA is 4.31 times less risky than Ally Financial. It trades about 0.3 of its potential returns per unit of risk. Ally Financial is currently generating about -0.01 per unit of risk. If you would invest  58.00  in BANK CENTRAL ASIA on September 22, 2024 and sell it today you would earn a total of  2.00  from holding BANK CENTRAL ASIA or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

BANK CENTRAL ASIA  vs.  Ally Financial

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BANK CENTRAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ally Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ally Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BANK CENTRAL and Ally Financial

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

The idea behind BANK CENTRAL ASIA and Ally Financial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.