Correlation Between Alliance Data and Reckitt Benckiser

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

Diversification Opportunities for Alliance Data and Reckitt Benckiser

0.0

Correlation Coefficient

Alliance Data  Reckitt Benckiser

Pay attention - limited upside

The 3 months correlation between Alliance and Reckitt is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Alliance Data i.e., Alliance Data and Reckitt Benckiser go up and down completely randomly.

Pair Corralation between Alliance Data and Reckitt Benckiser

If you would invest  5,150  in Alliance Data Systems on September 22, 2024 and sell it today you would earn a total of  981.00  from holding Alliance Data Systems or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alliance Data Systems  vs.  Reckitt Benckiser Group

Alliance Data Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 7 (%) 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.

Reckitt Benckiser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Reckitt Benckiser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alliance Data and Reckitt Benckiser

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

The idea behind Alliance Data Systems and Reckitt Benckiser Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.