Correlation Between Alliance Data and THORNEY TECHS
Can any of the company-specific risk be diversified away by investing in both Alliance Data and THORNEY TECHS 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 THORNEY TECHS 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 THORNEY TECHS LTD, you can compare the effects of market volatilities on Alliance Data and THORNEY TECHS 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 THORNEY TECHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and THORNEY TECHS.
Diversification Opportunities for Alliance Data and THORNEY TECHS
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alliance and THORNEY is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of Alliance Data i.e., Alliance Data and THORNEY TECHS go up and down completely randomly.
Pair Corralation between Alliance Data and THORNEY TECHS
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 0.58 times more return on investment than THORNEY TECHS. However, Alliance Data Systems is 1.72 times less risky than THORNEY TECHS. It trades about 0.03 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about 0.01 per unit of risk. If you would invest 5,984 in Alliance Data Systems on November 7, 2024 and sell it today you would earn a total of 62.00 from holding Alliance Data Systems or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. THORNEY TECHS LTD
Performance |
| Timeline |
| Alliance Data Systems |
| THORNEY TECHS LTD |
Alliance Data and THORNEY TECHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and THORNEY TECHS
The main advantage of trading using opposite Alliance Data and THORNEY TECHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, THORNEY TECHS 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 THORNEY TECHS will offset losses from the drop in THORNEY TECHS's long position.| Alliance Data vs. ATOSS SOFTWARE | Alliance Data vs. Beta Systems Software | Alliance Data vs. FORMPIPE SOFTWARE AB | Alliance Data vs. BioNTech SE |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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