Correlation Between Ally Financial and American Airlines
Can any of the company-specific risk be diversified away by investing in both Ally Financial and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and American Airlines Group, you can compare the effects of market volatilities on Ally Financial and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and American Airlines.
Diversification Opportunities for Ally Financial and American Airlines
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ally and American is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Ally Financial i.e., Ally Financial and American Airlines go up and down completely randomly.
Pair Corralation between Ally Financial and American Airlines
Given the investment horizon of 90 days Ally Financial is expected to generate 0.77 times more return on investment than American Airlines. However, Ally Financial is 1.3 times less risky than American Airlines. It trades about 0.03 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.1 per unit of risk. If you would invest 3,943 in Ally Financial on January 25, 2024 and sell it today you would earn a total of 33.00 from holding Ally Financial or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. American Airlines Group
Performance |
| Timeline |
| Ally Financial |
| American Airlines |
Ally Financial and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and American Airlines
The main advantage of trading using opposite Ally Financial and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Ally Financial vs. American Express | Ally Financial vs. Mastercard | Ally Financial vs. Visa Class A | Ally Financial vs. PayPal Holdings |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |