Correlation Between Alliance Data and Auction Technology

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

Diversification Opportunities for Alliance Data and Auction Technology

0.81

Correlation Coefficient

Alliance Data  Auction Technology

Very poor diversification

The 3 months correlation between Alliance and Auction is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Alliance Data i.e., Alliance Data and Auction Technology go up and down completely randomly.

Pair Corralation between Alliance Data and Auction Technology

Assuming the 90 days trading horizon Alliance Data is expected to generate 1.82 times less return on investment than Auction Technology. But when comparing it to its historical volatility, Alliance Data Systems is 2.05 times less risky than Auction Technology. It trades about 0.33 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  45,350  in Auction Technology Group on September 16, 2024 and sell it today you would earn a total of  12,150  from holding Auction Technology Group or generate 26.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Alliance Data Systems  vs.  Auction Technology Group

Alliance Data Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 12 (%) 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.

Auction Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Data and Auction Technology

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

The idea behind Alliance Data Systems and Auction Technology Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.