Correlation Between ALPS Emerging and Sphere Entertainment

Can any of the company-specific risk be diversified away by investing in both ALPS Emerging and Sphere Entertainment 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 ALPS Emerging and Sphere Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALPS Emerging Sector and Sphere Entertainment Co, you can compare the effects of market volatilities on ALPS Emerging and Sphere Entertainment 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 ALPS Emerging with a short position of Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPS Emerging and Sphere Entertainment.

Diversification Opportunities for ALPS Emerging and Sphere Entertainment

0.4

Correlation Coefficient

ALPS Emerging  Sphere Entertainment

Very weak diversification

The 3 months correlation between ALPS and Sphere is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Emerging Sector and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and ALPS Emerging 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 ALPS Emerging Sector are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of ALPS Emerging i.e., ALPS Emerging and Sphere Entertainment go up and down completely randomly.

Pair Corralation between ALPS Emerging and Sphere Entertainment

Given the investment horizon of 90 days ALPS Emerging Sector is expected to generate 0.29 times more return on investment than Sphere Entertainment. However, ALPS Emerging Sector is 3.5 times less risky than Sphere Entertainment. It trades about 0.02 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.01 per unit of risk. If you would invest  2,002  in ALPS Emerging Sector on December 2, 2024 and sell it today you would earn a total of  82.00  from holding ALPS Emerging Sector or generate 4.1% return on investment over 90 days.

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

ALPS Emerging Sector  vs.  Sphere Entertainment Co

ALPS Emerging Sector

Risk-Adjusted Performance

Very Weak

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

Sphere Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ALPS Emerging and Sphere Entertainment

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

The idea behind ALPS Emerging Sector and Sphere Entertainment Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.