Correlation Between Ally Financial and Lufax Holding

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

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

Diversification Opportunities for Ally Financial and Lufax Holding

-0.4

Correlation Coefficient

Ally Financial  Lufax Holding

Very good diversification

The 3 months correlation between Ally and Lufax is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Lufax Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lufax Holding and Ally 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 Ally Financial are associated (or correlated) with Lufax Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lufax Holding has no effect on the direction of Ally Financial i.e., Ally Financial and Lufax Holding go up and down completely randomly.

Pair Corralation between Ally Financial and Lufax Holding

Given the investment horizon of 90 days Ally Financial is expected to under-perform the Lufax Holding. But the stock apears to be less risky and, when comparing its historical volatility, Ally Financial is 2.79 times less risky than Lufax Holding. The stock trades about -0.22 of its potential returns per unit of risk. The Lufax Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  235.00  in Lufax Holding on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Lufax Holding or generate 4.68% return on investment over 90 days.

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

Ally Financial  vs.  Lufax Holding

Ally Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Ally Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lufax Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lufax Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lufax Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ally Financial and Lufax Holding

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

The idea behind Ally Financial and Lufax Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.