Correlation Between Alliance Data and DATA MODUL

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

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

Diversification Opportunities for Alliance Data and DATA MODUL

-0.39

Correlation Coefficient

Alliance Data  DATA MODUL

Very good diversification

The 3 months correlation between Alliance and DATA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and DATA MODUL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA MODUL and Alliance Data 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 Alliance Data Systems are associated (or correlated) with DATA MODUL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA MODUL has no effect on the direction of Alliance Data i.e., Alliance Data and DATA MODUL go up and down completely randomly.

Pair Corralation between Alliance Data and DATA MODUL

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.55 times more return on investment than DATA MODUL. However, Alliance Data is 1.55 times more volatile than DATA MODUL . It trades about 0.18 of its potential returns per unit of risk. DATA MODUL is currently generating about -0.07 per unit of risk. If you would invest  4,514  in Alliance Data Systems on October 25, 2024 and sell it today you would earn a total of  1,664  from holding Alliance Data Systems or generate 36.86% return on investment over 90 days.

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

Alliance Data Systems  vs.  DATA MODUL

Alliance Data Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 14 (%) 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.

DATA MODUL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATA MODUL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary 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 Alliance Data and DATA MODUL

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

The idea behind Alliance Data Systems and DATA MODUL 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.