Correlation Between Alliance Data and Pure Storage
Can any of the company-specific risk be diversified away by investing in both Alliance Data and Pure Storage 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 Pure Storage 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 Pure Storage, you can compare the effects of market volatilities on Alliance Data and Pure Storage 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 Pure Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Pure Storage.
Diversification Opportunities for Alliance Data and Pure Storage
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alliance and Pure is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Alliance Data i.e., Alliance Data and Pure Storage go up and down completely randomly.
Pair Corralation between Alliance Data and Pure Storage
Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Pure Storage. But the stock apears to be less risky and, when comparing its historical volatility, Alliance Data Systems is 1.51 times less risky than Pure Storage. The stock trades about -0.08 of its potential returns per unit of risk. The Pure Storage is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,068 in Pure Storage on October 9, 2024 and sell it today you would earn a total of 24.00 from holding Pure Storage or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. Pure Storage
Performance |
| Timeline |
| Alliance Data Systems |
| Pure Storage |
Alliance Data and Pure Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Pure Storage
The main advantage of trading using opposite Alliance Data and Pure Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Pure Storage 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 Pure Storage will offset losses from the drop in Pure Storage's long position.| Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc |
| Pure Storage vs. SIERRA METALS | Pure Storage vs. Aluminum of | Pure Storage vs. FIREWEED METALS P | Pure Storage vs. Materialise NV |
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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