Correlation Between Global Payments and ALJ Regional

Can any of the company-specific risk be diversified away by investing in both Global Payments and ALJ Regional 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 Global Payments and ALJ Regional into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Payments and ALJ Regional Holdings, you can compare the effects of market volatilities on Global Payments and ALJ Regional 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 Global Payments with a short position of ALJ Regional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Payments and ALJ Regional.

Diversification Opportunities for Global Payments and ALJ Regional

0.58

Correlation Coefficient

Global Payments  ALJ Regional

Very weak diversification

The 3 months correlation between Global and ALJ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and ALJ Regional Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALJ Regional Holdings and Global Payments 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 Global Payments are associated (or correlated) with ALJ Regional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALJ Regional Holdings has no effect on the direction of Global Payments i.e., Global Payments and ALJ Regional go up and down completely randomly.

Pair Corralation between Global Payments and ALJ Regional

If you would invest  10,871  in Global Payments on September 5, 2024 and sell it today you would earn a total of  954.00  from holding Global Payments or generate 8.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Global Payments  vs.  ALJ Regional Holdings

Global Payments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Global Payments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALJ Regional Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALJ Regional Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, ALJ Regional is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Global Payments and ALJ Regional

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

The idea behind Global Payments and ALJ Regional Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.