Correlation Between Alliance Data and Fresenius Medical

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

Diversification Opportunities for Alliance Data and Fresenius Medical

0.19

Correlation Coefficient

Alliance Data  Fresenius Medical

Average diversification

The 3 months correlation between Alliance and Fresenius is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Alliance Data i.e., Alliance Data and Fresenius Medical go up and down completely randomly.

Pair Corralation between Alliance Data and Fresenius Medical

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Fresenius Medical. In addition to that, Alliance Data is 1.78 times more volatile than Fresenius Medical Care. It trades about -0.07 of its total potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.1 per unit of volatility. If you would invest  4,295  in Fresenius Medical Care on December 1, 2024 and sell it today you would earn a total of  336.00  from holding Fresenius Medical Care or generate 7.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Alliance Data Systems  vs.  Fresenius Medical Care

Alliance Data Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fresenius Medical Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Fresenius Medical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alliance Data and Fresenius Medical

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

The idea behind Alliance Data Systems and Fresenius Medical Care 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.