Correlation Between Alliance Data and IXICO PLC
Can any of the company-specific risk be diversified away by investing in both Alliance Data and IXICO PLC 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 IXICO PLC 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 IXICO PLC, you can compare the effects of market volatilities on Alliance Data and IXICO PLC 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 IXICO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and IXICO PLC.
Diversification Opportunities for Alliance Data and IXICO PLC
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alliance and IXICO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and IXICO PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXICO PLC 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 IXICO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXICO PLC has no effect on the direction of Alliance Data i.e., Alliance Data and IXICO PLC go up and down completely randomly.
Pair Corralation between Alliance Data and IXICO PLC
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 0.64 times more return on investment than IXICO PLC. However, Alliance Data Systems is 1.56 times less risky than IXICO PLC. It trades about 0.14 of its potential returns per unit of risk. IXICO PLC is currently generating about -0.11 per unit of risk. If you would invest 5,829 in Alliance Data Systems on September 23, 2024 and sell it today you would earn a total of 302.00 from holding Alliance Data Systems or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alliance Data Systems vs. IXICO PLC
Performance |
| Timeline |
| Alliance Data Systems |
| IXICO PLC |
Alliance Data and IXICO PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and IXICO PLC
The main advantage of trading using opposite Alliance Data and IXICO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, IXICO PLC 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 IXICO PLC will offset losses from the drop in IXICO PLC's long position.| Alliance Data vs. Oakley Capital Investments | Alliance Data vs. New Residential Investment | Alliance Data vs. Bankers Investment Trust | Alliance Data vs. Schroders Investment Trusts |
| IXICO PLC vs. Silver Bullet Data | IXICO PLC vs. Teradata Corp | IXICO PLC vs. Ion Beam Applications | IXICO PLC vs. Alliance Data Systems |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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