Correlation Between Public Storage and Alliance Data

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

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

Diversification Opportunities for Public Storage and Alliance Data

-0.48

Correlation Coefficient

Public Storage  Alliance Data

Very good diversification

The 3 months correlation between Public and Alliance is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage 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 Public Storage 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 Public Storage 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 Public Storage i.e., Public Storage and Alliance Data go up and down completely randomly.

Pair Corralation between Public Storage and Alliance Data

Assuming the 90 days trading horizon Public Storage is expected to under-perform the Alliance Data. But the stock apears to be less risky and, when comparing its historical volatility, Public Storage is 2.3 times less risky than Alliance Data. The stock trades about -0.09 of its potential returns per unit of risk. The Alliance Data Systems is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,751  in Alliance Data Systems on September 12, 2024 and sell it today you would earn a total of  1,727  from holding Alliance Data Systems or generate 36.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Public Storage  vs.  Alliance Data Systems

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Alliance Data Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Public Storage and Alliance Data

The main advantage of trading using opposite Public Storage and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Storage 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 Public Storage 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.