Correlation Between Alliance Data and CITIC

Can any of the company-specific risk be diversified away by investing in both Alliance Data and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on Alliance Data and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and CITIC.

Diversification Opportunities for Alliance Data and CITIC

0.76

Correlation Coefficient

Alliance Data  CITIC

Poor diversification

The 3 months correlation between Alliance and CITIC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Alliance Data i.e., Alliance Data and CITIC go up and down completely randomly.

Pair Corralation between Alliance Data and CITIC

Assuming the 90 days trading horizon Alliance Data is expected to generate 1.35 times less return on investment than CITIC. In addition to that, Alliance Data is 1.63 times more volatile than CITIC LTD ADR5. It trades about 0.11 of its total potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.23 per unit of volatility. If you would invest  501.00  in CITIC LTD ADR5 on May 4, 2025 and sell it today you would earn a total of  124.00  from holding CITIC LTD ADR5 or generate 24.75% return on investment over 90 days.

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

Alliance Data Systems  vs.  CITIC LTD ADR5

Alliance Data Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

CITIC LTD ADR5

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Data and CITIC

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

The idea behind Alliance Data Systems and CITIC LTD ADR5 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.