Correlation Between Media and Alliance Data

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

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

Diversification Opportunities for Media and Alliance Data

-0.38

Correlation Coefficient

Media  Alliance Data

Very good diversification

The 3 months correlation between Media and Alliance is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems and Media 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 Media and Games are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of Media i.e., Media and Alliance Data go up and down completely randomly.

Pair Corralation between Media and Alliance Data

Assuming the 90 days trading horizon Media and Games is expected to generate 1.53 times more return on investment than Alliance Data. However, Media is 1.53 times more volatile than Alliance Data Systems. It trades about 0.05 of its potential returns per unit of risk. Alliance Data Systems is currently generating about -0.16 per unit of risk. If you would invest  318.00  in Media and Games on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Media and Games or generate 7.23% return on investment over 90 days.

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

Media and Games  vs.  Alliance Data Systems

Media and Games

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Media and Alliance Data

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

The idea behind Media and Games and Alliance Data Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.