Correlation Between Fresenius Medical and Alliance Data
Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and Alliance Data 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 Fresenius Medical and Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fresenius Medical Care and Alliance Data Systems, you can compare the effects of market volatilities on Fresenius Medical and Alliance Data 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 Fresenius Medical with a short position of Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Alliance Data.
Diversification Opportunities for Fresenius Medical and Alliance Data
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fresenius and Alliance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Alliance Data go up and down completely randomly.
Pair Corralation between Fresenius Medical and Alliance Data
Assuming the 90 days trading horizon Fresenius Medical is expected to generate 1.87 times less return on investment than Alliance Data. But when comparing it to its historical volatility, Fresenius Medical Care is 1.85 times less risky than Alliance Data. It trades about 0.05 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,855 in Alliance Data Systems on September 3, 2024 and sell it today you would earn a total of 2,045 from holding Alliance Data Systems or generate 53.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 78.51% |
| Values | Daily Returns |
Fresenius Medical Care vs. Alliance Data Systems
Performance |
| Timeline |
| Fresenius Medical Care |
| Alliance Data Systems |
Fresenius Medical and Alliance Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fresenius Medical and Alliance Data
The main advantage of trading using opposite Fresenius Medical and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical position performs unexpectedly, Alliance Data 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 Data will offset losses from the drop in Alliance Data's long position.| Fresenius Medical vs. Catalyst Media Group | Fresenius Medical vs. CATLIN GROUP | Fresenius Medical vs. Magnora ASA | Fresenius Medical vs. RTW Venture Fund |
| Alliance Data vs. Fresenius Medical Care | Alliance Data vs. Alior Bank SA | Alliance Data vs. Ally Financial | Alliance Data vs. MT Bank Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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