Correlation Between Alliance Data and Liontrust Asset

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

Diversification Opportunities for Alliance Data and Liontrust Asset

0.36

Correlation Coefficient

Alliance Data  Liontrust Asset

Weak diversification

The 3 months correlation between Alliance and Liontrust is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Liontrust Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontrust Asset Mana 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 Liontrust Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontrust Asset Mana has no effect on the direction of Alliance Data i.e., Alliance Data and Liontrust Asset go up and down completely randomly.

Pair Corralation between Alliance Data and Liontrust Asset

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Liontrust Asset. In addition to that, Alliance Data is 1.08 times more volatile than Liontrust Asset Management. It trades about -0.06 of its total potential returns per unit of risk. Liontrust Asset Management is currently generating about -0.04 per unit of volatility. If you would invest  44,150  in Liontrust Asset Management on December 2, 2024 and sell it today you would lose (3,100) from holding Liontrust Asset Management or give up 7.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

Alliance Data Systems  vs.  Liontrust Asset Management

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.

Liontrust Asset Mana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liontrust Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Liontrust Asset 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 Liontrust Asset

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

The idea behind Alliance Data Systems and Liontrust Asset Management 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.