Correlation Between Magic Empire and Ally Financial

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

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

Diversification Opportunities for Magic Empire and Ally Financial

-0.34

Correlation Coefficient

Magic Empire  Ally Financial

Very good diversification

The 3 months correlation between Magic and Ally is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Magic Empire Global and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial and Magic Empire 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 Magic Empire Global are associated (or correlated) with Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Magic Empire i.e., Magic Empire and Ally Financial go up and down completely randomly.

Pair Corralation between Magic Empire and Ally Financial

Given the investment horizon of 90 days Magic Empire Global is expected to under-perform the Ally Financial. In addition to that, Magic Empire is 2.37 times more volatile than Ally Financial. It trades about -0.06 of its total potential returns per unit of risk. Ally Financial is currently generating about 0.07 per unit of volatility. If you would invest  3,622  in Ally Financial on March 5, 2024 and sell it today you would earn a total of  275.00  from holding Ally Financial or generate 7.59% return on investment over 90 days.

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

Magic Empire Global  vs.  Ally Financial

Magic Empire Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magic Empire Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ally Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Ally Financial may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Magic Empire and Ally Financial

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

The idea behind Magic Empire Global and Ally Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.