Correlation Between Coor Service and Alliance Data

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

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

Diversification Opportunities for Coor Service and Alliance Data

-0.71

Correlation Coefficient

Coor Service  Alliance Data

Pay attention - limited upside

The 3 months correlation between Coor and Alliance is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Coor Service Management 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 Coor Service 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 Coor Service Management 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 Coor Service i.e., Coor Service and Alliance Data go up and down completely randomly.

Pair Corralation between Coor Service and Alliance Data

Assuming the 90 days horizon Coor Service Management is expected to under-perform the Alliance Data. In addition to that, Coor Service is 2.24 times more volatile than Alliance Data Systems. It trades about -0.09 of its total potential returns per unit of risk. Alliance Data Systems is currently generating about 0.0 per unit of volatility. If you would invest  5,952  in Alliance Data Systems on October 23, 2024 and sell it today you would lose (8.00) from holding Alliance Data Systems or give up 0.13% of portfolio value over 90 days.

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

Coor Service Management  vs.  Alliance Data Systems

Coor Service Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coor Service Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 unsteady fundamental indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coor Service and Alliance Data

The main advantage of trading using opposite Coor Service and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coor Service 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 Coor Service Management 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.