Correlation Between Alliance Data and COSTCO WHOLESALE
Can any of the company-specific risk be diversified away by investing in both Alliance Data and COSTCO WHOLESALE 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on Alliance Data and COSTCO WHOLESALE 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 COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and COSTCO WHOLESALE.
Diversification Opportunities for Alliance Data and COSTCO WHOLESALE
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alliance and COSTCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of Alliance Data i.e., Alliance Data and COSTCO WHOLESALE go up and down completely randomly.
Pair Corralation between Alliance Data and COSTCO WHOLESALE
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.81 times more return on investment than COSTCO WHOLESALE. However, Alliance Data is 1.81 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.19 of its potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.54 per unit of risk. If you would invest 6,106 in Alliance Data Systems on October 11, 2024 and sell it today you would lose (378.00) from holding Alliance Data Systems or give up 6.19% 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. COSTCO WHOLESALE CDR
Performance |
| Timeline |
| Alliance Data Systems |
| COSTCO WHOLESALE CDR |
Alliance Data and COSTCO WHOLESALE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and COSTCO WHOLESALE
The main advantage of trading using opposite Alliance Data and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, COSTCO WHOLESALE 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 COSTCO WHOLESALE will offset losses from the drop in COSTCO WHOLESALE's long position.| Alliance Data vs. Media and Games | Alliance Data vs. PLANT VEDA FOODS | Alliance Data vs. THAI BEVERAGE | Alliance Data vs. CN MODERN DAIRY |
| COSTCO WHOLESALE vs. CarsalesCom | COSTCO WHOLESALE vs. PACIFIC ONLINE | COSTCO WHOLESALE vs. Alliance Data Systems | COSTCO WHOLESALE vs. Cass Information 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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