Correlation Between Alliance Entertainment and Cheer Holding

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

Diversification Opportunities for Alliance Entertainment and Cheer Holding

-0.53

Correlation Coefficient

Alliance Entertainment  Cheer Holding

Excellent diversification

The 3 months correlation between Alliance and Cheer is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Entertainment Holding and Cheer Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheer Holding 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 Cheer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheer Holding has no effect on the direction of Alliance Entertainment i.e., Alliance Entertainment and Cheer Holding go up and down completely randomly.

Pair Corralation between Alliance Entertainment and Cheer Holding

Assuming the 90 days horizon Alliance Entertainment Holding is expected to under-perform the Cheer Holding. In addition to that, Alliance Entertainment is 7.18 times more volatile than Cheer Holding. It trades about -0.03 of its total potential returns per unit of risk. Cheer Holding is currently generating about -0.04 per unit of volatility. If you would invest  257.00  in Cheer Holding on October 24, 2024 and sell it today you would lose (7.00) from holding Cheer Holding or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alliance Entertainment Holding  vs.  Cheer Holding

Alliance Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Alliance Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Cheer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheer Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Alliance Entertainment and Cheer Holding

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

The idea behind Alliance Entertainment Holding and Cheer Holding 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..