Correlation Between Alliance Data and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Alliance Data and Clean Energy 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 Clean Energy 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 Clean Energy Fuels, you can compare the effects of market volatilities on Alliance Data and Clean Energy 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 Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Clean Energy.
Diversification Opportunities for Alliance Data and Clean Energy
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alliance and Clean is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Alliance Data i.e., Alliance Data and Clean Energy go up and down completely randomly.
Pair Corralation between Alliance Data and Clean Energy
Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Clean Energy. But the stock apears to be less risky and, when comparing its historical volatility, Alliance Data Systems is 2.01 times less risky than Clean Energy. The stock trades about -0.08 of its potential returns per unit of risk. The Clean Energy Fuels is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 270.00 in Clean Energy Fuels on October 9, 2024 and sell it today you would earn a total of 9.00 from holding Clean Energy Fuels or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. Clean Energy Fuels
Performance |
| Timeline |
| Alliance Data Systems |
| Clean Energy Fuels |
Alliance Data and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Clean Energy
The main advantage of trading using opposite Alliance Data and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.| Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc |
| Clean Energy vs. NESTE OYJ UNSPADR | Clean Energy vs. Superior Plus Corp | Clean Energy vs. NMI Holdings | Clean Energy vs. SIVERS SEMICONDUCTORS AB |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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