Correlation Between Alliance Financial and Rubberex M

Can any of the company-specific risk be diversified away by investing in both Alliance Financial and Rubberex M 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 Rubberex M 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 Rubberex M, you can compare the effects of market volatilities on Alliance Financial and Rubberex M 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 Rubberex M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Financial and Rubberex M.

Diversification Opportunities for Alliance Financial and Rubberex M

-0.41

Correlation Coefficient

Alliance Financial  Rubberex M

Very good diversification

The 3 months correlation between Alliance and Rubberex is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and Rubberex M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubberex M 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 Rubberex M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubberex M has no effect on the direction of Alliance Financial i.e., Alliance Financial and Rubberex M go up and down completely randomly.

Pair Corralation between Alliance Financial and Rubberex M

Assuming the 90 days trading horizon Alliance Financial Group is expected to generate 0.48 times more return on investment than Rubberex M. However, Alliance Financial Group is 2.09 times less risky than Rubberex M. It trades about 0.13 of its potential returns per unit of risk. Rubberex M is currently generating about -0.03 per unit of risk. If you would invest  427.00  in Alliance Financial Group on September 15, 2024 and sell it today you would earn a total of  59.00  from holding Alliance Financial Group or generate 13.82% return on investment over 90 days.

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

Alliance Financial Group  vs.  Rubberex M

Alliance Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 10 (%) 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.

Rubberex M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubberex M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Rubberex M is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alliance Financial and Rubberex M

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

The idea behind Alliance Financial Group and Rubberex M 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..