Correlation Between Alliance Entertainment and Astral Foods

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

Diversification Opportunities for Alliance Entertainment and Astral Foods

0.0

Correlation Coefficient

Alliance Entertainment  Astral Foods

Pay attention - limited upside

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

Pair Corralation between Alliance Entertainment and Astral Foods

Assuming the 90 days horizon Alliance Entertainment Holding is expected to generate 23.1 times more return on investment than Astral Foods. However, Alliance Entertainment is 23.1 times more volatile than Astral Foods Limited. It trades about 0.14 of its potential returns per unit of risk. Astral Foods Limited is currently generating about -0.06 per unit of risk. If you would invest  6.60  in Alliance Entertainment Holding on October 11, 2024 and sell it today you would earn a total of  43.39  from holding Alliance Entertainment Holding or generate 657.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	54.55%
Values	Daily Returns

Alliance Entertainment Holding  vs.  Astral Foods Limited

Alliance Entertainment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Alliance Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Astral Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astral Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Astral Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alliance Entertainment and Astral Foods

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

The idea behind Alliance Entertainment Holding and Astral Foods Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.