Correlation Between Alliance Data and Wabash National

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

Diversification Opportunities for Alliance Data and Wabash National

0.62

Correlation Coefficient

Alliance Data  Wabash National

Poor diversification

The 3 months correlation between Alliance and Wabash is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Alliance Data i.e., Alliance Data and Wabash National go up and down completely randomly.

Pair Corralation between Alliance Data and Wabash National

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 0.92 times more return on investment than Wabash National. However, Alliance Data Systems is 1.08 times less risky than Wabash National. It trades about 0.02 of its potential returns per unit of risk. Wabash National is currently generating about -0.26 per unit of risk. If you would invest  5,880  in Alliance Data Systems on October 7, 2024 and sell it today you would earn a total of  22.00  from holding Alliance Data Systems or generate 0.37% return on investment over 90 days.

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

Alliance Data Systems  vs.  Wabash National

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

Wabash National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wabash National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alliance Data and Wabash National

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

The idea behind Alliance Data Systems and Wabash National 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.