Correlation Between Alliance Data and Hyatt Hotels
Can any of the company-specific risk be diversified away by investing in both Alliance Data and Hyatt Hotels 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 Hyatt Hotels 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 Hyatt Hotels, you can compare the effects of market volatilities on Alliance Data and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Hyatt Hotels.
Diversification Opportunities for Alliance Data and Hyatt Hotels
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alliance and Hyatt is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of Alliance Data i.e., Alliance Data and Hyatt Hotels go up and down completely randomly.
Pair Corralation between Alliance Data and Hyatt Hotels
Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Hyatt Hotels. In addition to that, Alliance Data is 1.14 times more volatile than Hyatt Hotels. It trades about -0.36 of its total potential returns per unit of risk. Hyatt Hotels is currently generating about -0.17 per unit of volatility. If you would invest 15,355 in Hyatt Hotels on October 14, 2024 and sell it today you would lose (675.00) from holding Hyatt Hotels or give up 4.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. Hyatt Hotels
Performance |
| Timeline |
| Alliance Data Systems |
| Hyatt Hotels |
Alliance Data and Hyatt Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Hyatt Hotels
The main advantage of trading using opposite Alliance Data and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Hyatt Hotels 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.| Alliance Data vs. KINGBOARD CHEMICAL | Alliance Data vs. Nippon Light Metal | Alliance Data vs. Quaker Chemical | Alliance Data vs. X FAB Silicon Foundries |
| Hyatt Hotels vs. TERADATA | Hyatt Hotels vs. The Boston Beer | Hyatt Hotels vs. Alliance Data Systems | Hyatt Hotels vs. THAI BEVERAGE |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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