Correlation Between Alliance Data and CyberAgent

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

Diversification Opportunities for Alliance Data and CyberAgent

0.55

Correlation Coefficient

Alliance Data  CyberAgent

Very weak diversification

The 3 months correlation between Alliance and CyberAgent is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and CyberAgent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberAgent 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 CyberAgent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberAgent has no effect on the direction of Alliance Data i.e., Alliance Data and CyberAgent go up and down completely randomly.

Pair Corralation between Alliance Data and CyberAgent

Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.03 times more return on investment than CyberAgent. However, Alliance Data is 1.03 times more volatile than CyberAgent. It trades about 0.18 of its potential returns per unit of risk. CyberAgent is currently generating about 0.14 per unit of risk. If you would invest  3,962  in Alliance Data Systems on April 20, 2025 and sell it today you would earn a total of  1,258  from holding Alliance Data Systems or generate 31.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Alliance Data Systems  vs.  CyberAgent

Alliance Data Systems

Risk-Adjusted Performance

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.

CyberAgent

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberAgent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CyberAgent reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Data and CyberAgent

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

The idea behind Alliance Data Systems and CyberAgent 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.