Correlation Between Alliance Data and INFORMATION SVC
Can any of the company-specific risk be diversified away by investing in both Alliance Data and INFORMATION SVC 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 INFORMATION SVC 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 INFORMATION SVC GRP, you can compare the effects of market volatilities on Alliance Data and INFORMATION SVC 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 INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and INFORMATION SVC.
Diversification Opportunities for Alliance Data and INFORMATION SVC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alliance and INFORMATION is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Alliance Data i.e., Alliance Data and INFORMATION SVC go up and down completely randomly.
Pair Corralation between Alliance Data and INFORMATION SVC
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.19 times more return on investment than INFORMATION SVC. However, Alliance Data is 1.19 times more volatile than INFORMATION SVC GRP. It trades about -0.08 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about -0.39 per unit of risk. If you would invest 6,138 in Alliance Data Systems on October 9, 2024 and sell it today you would lose (154.00) from holding Alliance Data Systems or give up 2.51% 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. INFORMATION SVC GRP
Performance |
| Timeline |
| Alliance Data Systems |
| INFORMATION SVC GRP |
Alliance Data and INFORMATION SVC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and INFORMATION SVC
The main advantage of trading using opposite Alliance Data and INFORMATION SVC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, INFORMATION SVC 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 INFORMATION SVC will offset losses from the drop in INFORMATION SVC's long position.| Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc |
| INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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