Correlation Between Alliance Data and TAL Education

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Can any of the company-specific risk be diversified away by investing in both Alliance Data and TAL Education 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 TAL Education 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 TAL Education Group, you can compare the effects of market volatilities on Alliance Data and TAL Education 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 TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and TAL Education.

Diversification Opportunities for Alliance Data and TAL Education

AllianceTALDiversified AwayAllianceTALDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Alliance and TAL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Alliance Data i.e., Alliance Data and TAL Education go up and down completely randomly.

Pair Corralation between Alliance Data and TAL Education

Assuming the 90 days trading horizon Alliance Data is expected to generate 181.43 times less return on investment than TAL Education. But when comparing it to its historical volatility, Alliance Data Systems is 2.75 times less risky than TAL Education. It trades about 0.01 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  955.00  in TAL Education Group on November 18, 2024 and sell it today you would earn a total of  465.00  from holding TAL Education Group or generate 48.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alliance Data Systems  vs.  TAL Education Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-1001020
JavaScript chart by amCharts 3.21.15LID IZZ
       Timeline  
Alliance Data Systems 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Alliance Data may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5456586062
TAL Education Group 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb91011121314

Alliance Data and TAL Education Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.54-4.9-3.26-1.610.01.663.365.056.74 0.020.030.040.050.060.070.080.09
JavaScript chart by amCharts 3.21.15LID IZZ
       Returns  

Pair Trading with Alliance Data and TAL Education

The main advantage of trading using opposite Alliance Data and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education's long position.
The idea behind Alliance Data Systems and TAL Education Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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