Correlation Between AMMB Holdings and Alliance Financial

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

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

Diversification Opportunities for AMMB Holdings and Alliance Financial

0.7

Correlation Coefficient

AMMB Holdings  Alliance Financial

Poor diversification

The 3 months correlation between AMMB and Alliance is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AMMB Holdings Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and AMMB Holdings 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 AMMB Holdings Bhd are associated (or correlated) with Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of AMMB Holdings i.e., AMMB Holdings and Alliance Financial go up and down completely randomly.

Pair Corralation between AMMB Holdings and Alliance Financial

Assuming the 90 days trading horizon AMMB Holdings is expected to generate 2.04 times less return on investment than Alliance Financial. But when comparing it to its historical volatility, AMMB Holdings Bhd is 1.26 times less risky than Alliance Financial. It trades about 0.06 of its potential returns per unit of risk. Alliance Financial Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  440.00  in Alliance Financial Group on September 24, 2024 and sell it today you would earn a total of  41.00  from holding Alliance Financial Group or generate 9.32% return on investment over 90 days.

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

AMMB Holdings Bhd  vs.  Alliance Financial Group

AMMB Holdings Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMMB Holdings Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, AMMB Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alliance Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AMMB Holdings and Alliance Financial

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

The idea behind AMMB Holdings Bhd and Alliance Financial Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.