Correlation Between Alliance Financial and Mr D

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

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

Diversification Opportunities for Alliance Financial and Mr D

-0.74

Correlation Coefficient

Alliance Financial  Mr D

Pay attention - limited upside

The 3 months correlation between Alliance and 5296 is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and Mr D I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr D I and Alliance Financial 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 Financial Group are associated (or correlated) with Mr D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr D I has no effect on the direction of Alliance Financial i.e., Alliance Financial and Mr D go up and down completely randomly.

Pair Corralation between Alliance Financial and Mr D

Assuming the 90 days trading horizon Alliance Financial Group is expected to generate 0.56 times more return on investment than Mr D. However, Alliance Financial Group is 1.77 times less risky than Mr D. It trades about 0.08 of its potential returns per unit of risk. Mr D I is currently generating about 0.0 per unit of risk. If you would invest  327.00  in Alliance Financial Group on September 26, 2024 and sell it today you would earn a total of  156.00  from holding Alliance Financial Group or generate 47.71% return on investment over 90 days.

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

Alliance Financial Group  vs.  Mr D I

Alliance Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mr D I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mr D I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alliance Financial and Mr D

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

The idea behind Alliance Financial Group and Mr D I 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.