Correlation Between Alfa Financial and Alliance Data

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

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

Diversification Opportunities for Alfa Financial and Alliance Data

-0.36

Correlation Coefficient

Alfa Financial  Alliance Data

Very good diversification

The 3 months correlation between Alfa and Alliance is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and Alliance Data go up and down completely randomly.

Pair Corralation between Alfa Financial and Alliance Data

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.48 times more return on investment than Alliance Data. However, Alfa Financial Software is 2.08 times less risky than Alliance Data. It trades about 0.04 of its potential returns per unit of risk. Alliance Data Systems is currently generating about -0.1 per unit of risk. If you would invest  21,450  in Alfa Financial Software on December 31, 2024 and sell it today you would earn a total of  750.00  from holding Alfa Financial Software or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Alfa Financial Software  vs.  Alliance Data Systems

Alfa Financial Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with Alfa Financial and Alliance Data

The main advantage of trading using opposite Alfa Financial and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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 Alfa Financial Software 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 Global Correlations module to find global opportunities by holding instruments from different markets.