Correlation Between Reinsurance Group and Alliance Data
Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and Alliance Data 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 Reinsurance Group and Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Alliance Data Systems, you can compare the effects of market volatilities on Reinsurance Group and Alliance Data 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 Reinsurance Group with a short position of Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Alliance Data.
Diversification Opportunities for Reinsurance Group and Alliance Data
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reinsurance and Alliance is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Alliance Data go up and down completely randomly.
Pair Corralation between Reinsurance Group and Alliance Data
Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 0.76 times more return on investment than Alliance Data. However, Reinsurance Group of is 1.32 times less risky than Alliance Data. It trades about 0.24 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.15 per unit of risk. If you would invest 20,200 in Reinsurance Group of on October 25, 2024 and sell it today you would earn a total of 1,200 from holding Reinsurance Group of or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reinsurance Group of vs. Alliance Data Systems
Performance |
| Timeline |
| Reinsurance Group |
| Alliance Data Systems |
Reinsurance Group and Alliance Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reinsurance Group and Alliance Data
The main advantage of trading using opposite Reinsurance Group and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group position performs unexpectedly, Alliance Data 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 Alliance Data will offset losses from the drop in Alliance Data's long position.| Reinsurance Group vs. Charter Communications | Reinsurance Group vs. Laureate Education | Reinsurance Group vs. MAVEN WIRELESS SWEDEN | Reinsurance Group vs. IDP EDUCATION LTD |
| Alliance Data vs. GRIFFIN MINING LTD | Alliance Data vs. MCEWEN MINING INC | Alliance Data vs. Reinsurance Group of | Alliance Data vs. De Grey Mining |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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