Correlation Between MT Bank and Alliance Data

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

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

Diversification Opportunities for MT Bank and Alliance Data

0.66

Correlation Coefficient

MT Bank  Alliance Data

Poor diversification

The 3 months correlation between 0JW2 and Alliance is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp 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 MT Bank 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 MT Bank Corp 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 MT Bank i.e., MT Bank and Alliance Data go up and down completely randomly.

Pair Corralation between MT Bank and Alliance Data

Assuming the 90 days trading horizon MT Bank Corp is expected to generate 0.55 times more return on investment than Alliance Data. However, MT Bank Corp is 1.83 times less risky than Alliance Data. It trades about 0.21 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.03 per unit of risk. If you would invest  16,826  in MT Bank Corp on September 4, 2024 and sell it today you would earn a total of  4,840  from holding MT Bank Corp or generate 28.77% return on investment over 90 days.

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

MT Bank Corp  vs.  Alliance Data Systems

MT Bank Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MT Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alliance Data Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alliance Data may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MT Bank and Alliance Data

The main advantage of trading using opposite MT Bank and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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 MT Bank Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.