Correlation Between Alliance Entertainment and Hooker Furniture

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Can any of the company-specific risk be diversified away by investing in both Alliance Entertainment and Hooker Furniture 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 Entertainment and Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Entertainment Holding and Hooker Furniture, you can compare the effects of market volatilities on Alliance Entertainment and Hooker Furniture 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 Entertainment with a short position of Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Entertainment and Hooker Furniture.

Diversification Opportunities for Alliance Entertainment and Hooker Furniture

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Alliance and Hooker is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Entertainment Holding and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture and Alliance Entertainment 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 Entertainment Holding are associated (or correlated) with Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Alliance Entertainment i.e., Alliance Entertainment and Hooker Furniture go up and down completely randomly.

Pair Corralation between Alliance Entertainment and Hooker Furniture

Given the investment horizon of 90 days Alliance Entertainment Holding is expected to generate 2.91 times more return on investment than Hooker Furniture. However, Alliance Entertainment is 2.91 times more volatile than Hooker Furniture. It trades about 0.21 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.04 per unit of risk. If you would invest  240.00  in Alliance Entertainment Holding on September 14, 2024 and sell it today you would earn a total of  370.00  from holding Alliance Entertainment Holding or generate 154.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alliance Entertainment Holding  vs.  Hooker Furniture

 Performance 
       Timeline  
Alliance Entertainment 

Risk-Adjusted Performance

16 of 100

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

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Hooker Furniture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alliance Entertainment and Hooker Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alliance Entertainment and Hooker Furniture

The main advantage of trading using opposite Alliance Entertainment and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Entertainment position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.
The idea behind Alliance Entertainment Holding and Hooker Furniture 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.
Check out your portfolio center.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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