Correlation Between Poh Huat and Alliance Financial

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

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

Diversification Opportunities for Poh Huat and Alliance Financial

0.33

Correlation Coefficient

Poh Huat  Alliance Financial

Weak diversification

The 3 months correlation between Poh and Alliance is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Poh Huat Resources and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and Poh Huat 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 Poh Huat Resources 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 Poh Huat i.e., Poh Huat and Alliance Financial go up and down completely randomly.

Pair Corralation between Poh Huat and Alliance Financial

Assuming the 90 days trading horizon Poh Huat is expected to generate 36.2 times less return on investment than Alliance Financial. But when comparing it to its historical volatility, Poh Huat Resources is 1.56 times less risky than Alliance Financial. It trades about 0.01 of its potential returns per unit of risk. Alliance Financial Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  436.00  in Alliance Financial Group on September 29, 2024 and sell it today you would earn a total of  50.00  from holding Alliance Financial Group or generate 11.47% return on investment over 90 days.

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

Poh Huat Resources  vs.  Alliance Financial Group

Poh Huat Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poh Huat Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Poh Huat 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

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Poh Huat and Alliance Financial

The main advantage of trading using opposite Poh Huat and Alliance Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poh Huat 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 Poh Huat Resources 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.