Correlation Between Albion Technology and Alliance Data
Can any of the company-specific risk be diversified away by investing in both Albion Technology 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 Albion Technology and Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albion Technology General and Alliance Data Systems, you can compare the effects of market volatilities on Albion Technology 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 Albion Technology with a short position of Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albion Technology and Alliance Data.
Diversification Opportunities for Albion Technology and Alliance Data
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Albion and Alliance is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Albion Technology General 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 Albion Technology 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 Albion Technology General 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 Albion Technology i.e., Albion Technology and Alliance Data go up and down completely randomly.
Pair Corralation between Albion Technology and Alliance Data
Assuming the 90 days trading horizon Albion Technology is expected to generate 37.17 times less return on investment than Alliance Data. But when comparing it to its historical volatility, Albion Technology General is 4.83 times less risky than Alliance Data. It trades about 0.01 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,634 in Alliance Data Systems on November 27, 2024 and sell it today you would earn a total of 3,014 from holding Alliance Data Systems or generate 114.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.0% |
| Values | Daily Returns |
Albion Technology General vs. Alliance Data Systems
Performance |
| Timeline |
| Albion Technology General |
| Alliance Data Systems |
Albion Technology and Alliance Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albion Technology and Alliance Data
The main advantage of trading using opposite Albion Technology and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albion Technology 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.| Albion Technology vs. Hansa Investment | Albion Technology vs. Lindsell Train Investment | Albion Technology vs. Smithson Investment Trust | Albion Technology vs. Vietnam Enterprise Investments |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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