Correlation Between AOYAMA TRADING and Alliance Data

Can any of the company-specific risk be diversified away by investing in both AOYAMA TRADING and Alliance Data 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 AOYAMA TRADING and Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AOYAMA TRADING and Alliance Data Systems, you can compare the effects of market volatilities on AOYAMA TRADING and Alliance Data 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 AOYAMA TRADING with a short position of Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of AOYAMA TRADING and Alliance Data.

Diversification Opportunities for AOYAMA TRADING and Alliance Data

0.84

Correlation Coefficient

AOYAMA TRADING  Alliance Data

Very poor diversification

The 3 months correlation between AOYAMA and Alliance is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems and AOYAMA TRADING 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 AOYAMA TRADING are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of AOYAMA TRADING i.e., AOYAMA TRADING and Alliance Data go up and down completely randomly.

Pair Corralation between AOYAMA TRADING and Alliance Data

Assuming the 90 days horizon AOYAMA TRADING is expected to generate 1.55 times more return on investment than Alliance Data. However, AOYAMA TRADING is 1.55 times more volatile than Alliance Data Systems. It trades about 0.2 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.15 per unit of risk. If you would invest  795.00  in AOYAMA TRADING on October 22, 2024 and sell it today you would earn a total of  535.00  from holding AOYAMA TRADING or generate 67.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AOYAMA TRADING  vs.  Alliance Data Systems

AOYAMA TRADING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

Alliance Data Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AOYAMA TRADING and Alliance Data

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

The idea behind AOYAMA TRADING and Alliance Data Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.