Correlation Between Metals Exploration and Alliance Data

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

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

Diversification Opportunities for Metals Exploration and Alliance Data

-0.22

Correlation Coefficient

Metals Exploration  Alliance Data

Very good diversification

The 3 months correlation between Metals and Alliance is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc 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 Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Alliance Data go up and down completely randomly.

Pair Corralation between Metals Exploration and Alliance Data

Assuming the 90 days trading horizon Metals Exploration is expected to generate 1.13 times less return on investment than Alliance Data. In addition to that, Metals Exploration is 1.03 times more volatile than Alliance Data Systems. It trades about 0.08 of its total potential returns per unit of risk. Alliance Data Systems is currently generating about 0.1 per unit of volatility. If you would invest  4,459  in Alliance Data Systems on October 8, 2024 and sell it today you would earn a total of  1,695  from holding Alliance Data Systems or generate 38.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.6%
Values	Daily Returns

Metals Exploration Plc  vs.  Alliance Data Systems

Metals Exploration Plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Metals Exploration may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alliance Data Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metals Exploration and Alliance Data

The main advantage of trading using opposite Metals Exploration and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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 Metals Exploration Plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.