Correlation Between Alliance Data and Blue Star

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

Diversification Opportunities for Alliance Data and Blue Star

0.31

Correlation Coefficient

Alliance Data  Blue Star

Weak diversification

The 3 months correlation between Alliance and Blue is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Blue Star Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Capital 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 Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Capital has no effect on the direction of Alliance Data i.e., Alliance Data and Blue Star go up and down completely randomly.

Pair Corralation between Alliance Data and Blue Star

Assuming the 90 days trading horizon Alliance Data is expected to generate 1.23 times less return on investment than Blue Star. But when comparing it to its historical volatility, Alliance Data Systems is 2.75 times less risky than Blue Star. It trades about 0.16 of its potential returns per unit of risk. Blue Star Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Blue Star Capital on October 5, 2024 and sell it today you would earn a total of  0.25  from holding Blue Star Capital or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Alliance Data Systems  vs.  Blue Star Capital

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 unsteady basic indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blue Star Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Data and Blue Star

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

The idea behind Alliance Data Systems and Blue Star Capital 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.