Correlation Between Alliance Data and Information Services

Can any of the company-specific risk be diversified away by investing in both Alliance Data and Information Services 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 Information Services 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 Information Services International Dentsu, you can compare the effects of market volatilities on Alliance Data and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Information Services.

Diversification Opportunities for Alliance Data and Information Services

-0.53

Correlation Coefficient

Alliance Data  Information Services

Excellent diversification

The 3 months correlation between Alliance and Information is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Alliance Data i.e., Alliance Data and Information Services go up and down completely randomly.

Pair Corralation between Alliance Data and Information Services

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Information Services. In addition to that, Alliance Data is 1.21 times more volatile than Information Services International Dentsu. It trades about -0.16 of its total potential returns per unit of risk. Information Services International Dentsu is currently generating about 0.08 per unit of volatility. If you would invest  3,540  in Information Services International Dentsu on December 24, 2024 and sell it today you would earn a total of  300.00  from holding Information Services International Dentsu or generate 8.47% return on investment over 90 days.

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

Alliance Data Systems  vs.  Information Services Internati

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 fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Information Services

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alliance Data and Information Services

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

The idea behind Alliance Data Systems and Information Services International Dentsu 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.