Correlation Between Alliance Data and AUTO TRADER
Can any of the company-specific risk be diversified away by investing in both Alliance Data and AUTO TRADER 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 AUTO TRADER 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 AUTO TRADER ADR, you can compare the effects of market volatilities on Alliance Data and AUTO TRADER 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 AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and AUTO TRADER.
Diversification Opportunities for Alliance Data and AUTO TRADER
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alliance and AUTO is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR 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 AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of Alliance Data i.e., Alliance Data and AUTO TRADER go up and down completely randomly.
Pair Corralation between Alliance Data and AUTO TRADER
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.81 times more return on investment than AUTO TRADER. However, Alliance Data is 1.81 times more volatile than AUTO TRADER ADR. It trades about 0.05 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about 0.06 per unit of risk. If you would invest 3,488 in Alliance Data Systems on October 14, 2024 and sell it today you would earn a total of 2,120 from holding Alliance Data Systems or generate 60.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. AUTO TRADER ADR
Performance |
| Timeline |
| Alliance Data Systems |
| AUTO TRADER ADR |
Alliance Data and AUTO TRADER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and AUTO TRADER
The main advantage of trading using opposite Alliance Data and AUTO TRADER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, AUTO TRADER 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 AUTO TRADER will offset losses from the drop in AUTO TRADER's 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 |
| AUTO TRADER vs. Teradata Corp | AUTO TRADER vs. Cass Information Systems | AUTO TRADER vs. Keck Seng Investments | AUTO TRADER 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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