Correlation Between Alliance Data and Fidelity National

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

Diversification Opportunities for Alliance Data and Fidelity National

0.12

Correlation Coefficient

Alliance Data  Fidelity National

Average diversification

The 3 months correlation between Alliance and Fidelity is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Fidelity National Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Alliance Data i.e., Alliance Data and Fidelity National go up and down completely randomly.

Pair Corralation between Alliance Data and Fidelity National

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.69 times more return on investment than Fidelity National. However, Alliance Data is 1.69 times more volatile than Fidelity National Information. It trades about -0.08 of its potential returns per unit of risk. Fidelity National Information is currently generating about -0.2 per unit of risk. If you would invest  6,138  in Alliance Data Systems on October 9, 2024 and sell it today you would lose (154.00) from holding Alliance Data Systems or give up 2.51% of portfolio value over 90 days.

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

Alliance Data Systems  vs.  Fidelity National Information

Alliance Data Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 13 (%) 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.

Fidelity National

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fidelity National Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity National 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 Fidelity National

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

The idea behind Alliance Data Systems and Fidelity National Information 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.