Correlation Between Alliance Data and Ion Beam

Can any of the company-specific risk be diversified away by investing in both Alliance Data and Ion Beam 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 Ion Beam 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 Ion Beam Applications, you can compare the effects of market volatilities on Alliance Data and Ion Beam 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 Ion Beam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Ion Beam.

Diversification Opportunities for Alliance Data and Ion Beam

0.0

Correlation Coefficient

Alliance Data  Ion Beam

Pay attention - limited upside

The 3 months correlation between Alliance and Ion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications 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 Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of Alliance Data i.e., Alliance Data and Ion Beam go up and down completely randomly.

Pair Corralation between Alliance Data and Ion Beam

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.15 times more return on investment than Ion Beam. However, Alliance Data is 1.15 times more volatile than Ion Beam Applications. It trades about 0.17 of its potential returns per unit of risk. Ion Beam Applications is currently generating about 0.06 per unit of risk. If you would invest  4,751  in Alliance Data Systems on September 12, 2024 and sell it today you would earn a total of  1,727  from holding Alliance Data Systems or generate 36.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Alliance Data Systems  vs.  Ion Beam Applications

Alliance Data Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ion Beam Applications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ion Beam Applications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ion Beam may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alliance Data and Ion Beam

The main advantage of trading using opposite Alliance Data and Ion Beam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, Ion Beam 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 Ion Beam will offset losses from the drop in Ion Beam's long position.

The idea behind Alliance Data Systems and Ion Beam Applications pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.