Correlation Between Alliance Data and GreenX Metals

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

Diversification Opportunities for Alliance Data and GreenX Metals

-0.11

Correlation Coefficient

Alliance Data  GreenX Metals

Good diversification

The 3 months correlation between Alliance and GreenX is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Alliance Data i.e., Alliance Data and GreenX Metals go up and down completely randomly.

Pair Corralation between Alliance Data and GreenX Metals

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 0.66 times more return on investment than GreenX Metals. However, Alliance Data Systems is 1.51 times less risky than GreenX Metals. It trades about 0.17 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.02 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	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Alliance Data Systems  vs.  GreenX Metals

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.

GreenX Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenX Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GreenX Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alliance Data and GreenX Metals

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

The idea behind Alliance Data Systems and GreenX Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.