Correlation Between Alliance Data and Workspace Group

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

Diversification Opportunities for Alliance Data and Workspace Group

0.73

Correlation Coefficient

Alliance Data  Workspace Group

Poor diversification

The 3 months correlation between Alliance and Workspace is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Workspace Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workspace Group PLC 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 Workspace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workspace Group PLC has no effect on the direction of Alliance Data i.e., Alliance Data and Workspace Group go up and down completely randomly.

Pair Corralation between Alliance Data and Workspace Group

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Workspace Group. In addition to that, Alliance Data is 1.7 times more volatile than Workspace Group PLC. It trades about -0.09 of its total potential returns per unit of risk. Workspace Group PLC is currently generating about -0.11 per unit of volatility. If you would invest  48,388  in Workspace Group PLC on December 25, 2024 and sell it today you would lose (5,938) from holding Workspace Group PLC or give up 12.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.8%
Values	Daily Returns

Alliance Data Systems  vs.  Workspace Group PLC

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Workspace Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Workspace Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Alliance Data and Workspace Group

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

The idea behind Alliance Data Systems and Workspace Group PLC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.