Correlation Between Ally Financial and Roth CH

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

By analyzing existing cross correlation between Ally Financial and Roth CH Acquisition, you can compare the effects of market volatilities on Ally Financial and Roth CH 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 Roth CH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Roth CH.

Diversification Opportunities for Ally Financial and Roth CH

-0.68

Correlation Coefficient

Ally Financial  Roth CH

Excellent diversification

The 3 months correlation between Ally and Roth is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Roth CH Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roth CH Acquisition 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 Roth CH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roth CH Acquisition has no effect on the direction of Ally Financial i.e., Ally Financial and Roth CH go up and down completely randomly.

Pair Corralation between Ally Financial and Roth CH

Given the investment horizon of 90 days Ally Financial is expected to generate 1.81 times more return on investment than Roth CH. However, Ally Financial is 1.81 times more volatile than Roth CH Acquisition. It trades about 0.16 of its potential returns per unit of risk. Roth CH Acquisition is currently generating about -0.03 per unit of risk. If you would invest  3,257  in Ally Financial on September 12, 2024 and sell it today you would earn a total of  598.00  from holding Ally Financial or generate 18.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Ally Financial  vs.  Roth CH Acquisition

Ally Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Ally Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Roth CH Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roth CH Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Roth CH is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ally Financial and Roth CH

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

The idea behind Ally Financial and Roth CH Acquisition 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.