Correlation Between Alliance Data and Sinopharm Group

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

Diversification Opportunities for Alliance Data and Sinopharm Group

0.6

Correlation Coefficient

Alliance Data  Sinopharm Group

Poor diversification

The 3 months correlation between Alliance and Sinopharm is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Sinopharm Group Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopharm Group 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 Sinopharm Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopharm Group has no effect on the direction of Alliance Data i.e., Alliance Data and Sinopharm Group go up and down completely randomly.

Pair Corralation between Alliance Data and Sinopharm Group

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Sinopharm Group. In addition to that, Alliance Data is 1.27 times more volatile than Sinopharm Group Co. It trades about -0.17 of its total potential returns per unit of risk. Sinopharm Group Co is currently generating about -0.09 per unit of volatility. If you would invest  254.00  in Sinopharm Group Co on October 10, 2024 and sell it today you would lose (6.00) from holding Sinopharm Group Co or give up 2.36% of portfolio value over 90 days.

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

Alliance Data Systems  vs.  Sinopharm Group Co

Alliance Data Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 12 (%) 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.

Sinopharm Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopharm Group Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sinopharm Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alliance Data and Sinopharm Group

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

The idea behind Alliance Data Systems and Sinopharm Group Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..