Correlation Between Alien Metals and Ally Financial

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

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

Diversification Opportunities for Alien Metals and Ally Financial

-0.4

Correlation Coefficient

Alien Metals  Ally Financial

Very good diversification

The 3 months correlation between Alien and Ally is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Alien Metals 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 Alien Metals 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 Alien Metals i.e., Alien Metals and Ally Financial go up and down completely randomly.

Pair Corralation between Alien Metals and Ally Financial

Assuming the 90 days trading horizon Alien Metals is expected to generate 1.41 times more return on investment than Ally Financial. However, Alien Metals is 1.41 times more volatile than Ally Financial. It trades about -0.14 of its potential returns per unit of risk. Ally Financial is currently generating about -0.26 per unit of risk. If you would invest  9.00  in Alien Metals on October 9, 2024 and sell it today you would lose (0.50) from holding Alien Metals or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Alien Metals  vs.  Ally Financial

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ally Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ally Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alien Metals and Ally Financial

The main advantage of trading using opposite Alien Metals and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alien Metals 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 Alien Metals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.