Correlation Between Weiss Korea and Ally Financial

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

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

Diversification Opportunities for Weiss Korea and Ally Financial

-0.24

Correlation Coefficient

Weiss Korea  Ally Financial

Very good diversification

The 3 months correlation between Weiss and Ally is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Weiss Korea Opportunity and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Weiss Korea 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 Weiss Korea Opportunity 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 Weiss Korea i.e., Weiss Korea and Ally Financial go up and down completely randomly.

Pair Corralation between Weiss Korea and Ally Financial

Assuming the 90 days trading horizon Weiss Korea Opportunity is expected to under-perform the Ally Financial. But the stock apears to be less risky and, when comparing its historical volatility, Weiss Korea Opportunity is 1.71 times less risky than Ally Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Ally Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Ally Financial on October 21, 2024 and sell it today you would earn a total of  815.00  from holding Ally Financial or generate 27.63% return on investment over 90 days.

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

Weiss Korea Opportunity  vs.  Ally Financial

Weiss Korea Opportunity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weiss Korea Opportunity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Weiss Korea 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ally Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Weiss Korea and Ally Financial

The main advantage of trading using opposite Weiss Korea and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weiss Korea 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 Weiss Korea Opportunity 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.