Correlation Between Alliance Data and Extra Space
Can any of the company-specific risk be diversified away by investing in both Alliance Data and Extra Space 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 Alliance Data and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and Extra Space Storage, you can compare the effects of market volatilities on Alliance Data and Extra Space 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 Alliance Data with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Extra Space.
Diversification Opportunities for Alliance Data and Extra Space
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alliance and Extra is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and Alliance Data 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 Alliance Data Systems are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Alliance Data i.e., Alliance Data and Extra Space go up and down completely randomly.
Pair Corralation between Alliance Data and Extra Space
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 2.39 times more return on investment than Extra Space. However, Alliance Data is 2.39 times more volatile than Extra Space Storage. It trades about 0.19 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.14 per unit of risk. If you would invest 5,101 in Alliance Data Systems on September 4, 2024 and sell it today you would earn a total of 897.00 from holding Alliance Data Systems or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alliance Data Systems vs. Extra Space Storage
Performance |
| Timeline |
| Alliance Data Systems |
| Extra Space Storage |
Alliance Data and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Extra Space
The main advantage of trading using opposite Alliance Data and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.| Alliance Data vs. Smithson Investment Trust | Alliance Data vs. Coor Service Management | Alliance Data vs. Impax Asset Management | Alliance Data vs. Waste Management |
| Extra Space vs. Samsung Electronics Co | Extra Space vs. Samsung Electronics Co | Extra Space vs. Hyundai Motor | Extra Space vs. Toyota Motor 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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