Correlation Between INFORMATION SVC and Alliance Data
Can any of the company-specific risk be diversified away by investing in both INFORMATION SVC 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 INFORMATION SVC and Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INFORMATION SVC GRP and Alliance Data Systems, you can compare the effects of market volatilities on INFORMATION SVC 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 INFORMATION SVC with a short position of Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of INFORMATION SVC and Alliance Data.
Diversification Opportunities for INFORMATION SVC and Alliance Data
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between INFORMATION and Alliance is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP 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 INFORMATION SVC 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 INFORMATION SVC GRP 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 INFORMATION SVC i.e., INFORMATION SVC and Alliance Data go up and down completely randomly.
Pair Corralation between INFORMATION SVC and Alliance Data
Assuming the 90 days horizon INFORMATION SVC GRP is expected to under-perform the Alliance Data. But the stock apears to be less risky and, when comparing its historical volatility, INFORMATION SVC GRP is 1.19 times less risky than Alliance Data. The stock trades about -0.39 of its potential returns per unit of risk. The Alliance Data Systems is currently generating about -0.08 of returns per unit of risk over similar time horizon. 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 |
INFORMATION SVC GRP vs. Alliance Data Systems
Performance |
| Timeline |
| INFORMATION SVC GRP |
| Alliance Data Systems |
INFORMATION SVC and Alliance Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INFORMATION SVC and Alliance Data
The main advantage of trading using opposite INFORMATION SVC and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INFORMATION SVC 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.| INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc |
| Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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