Correlation Between Golden Metal and Alliance Data

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

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

Diversification Opportunities for Golden Metal and Alliance Data

-0.29

Correlation Coefficient

Golden Metal  Alliance Data

Very good diversification

The 3 months correlation between Golden and Alliance is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources 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 Golden Metal 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 Golden Metal Resources 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 Golden Metal i.e., Golden Metal and Alliance Data go up and down completely randomly.

Pair Corralation between Golden Metal and Alliance Data

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 14.03 times more return on investment than Alliance Data. However, Golden Metal is 14.03 times more volatile than Alliance Data Systems. It trades about 0.05 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.06 per unit of risk. If you would invest  9.00  in Golden Metal Resources on December 4, 2024 and sell it today you would earn a total of  3,241  from holding Golden Metal Resources or generate 36011.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.06%
Values	Daily Returns

Golden Metal Resources  vs.  Alliance Data Systems

Golden Metal Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Golden Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Golden Metal and Alliance Data

The main advantage of trading using opposite Golden Metal and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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 Golden Metal Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.