Correlation Between Eldorado Gold and Alliance Entertainment

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

By analyzing existing cross correlation between Eldorado Gold Corp and Alliance Entertainment Holding, you can compare the effects of market volatilities on Eldorado Gold and Alliance 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 Eldorado Gold with a short position of Alliance Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and Alliance Entertainment.

Diversification Opportunities for Eldorado Gold and Alliance Entertainment

0.23

Correlation Coefficient

Eldorado Gold  Alliance Entertainment

Modest diversification

The 3 months correlation between Eldorado and Alliance is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Eldorado Gold 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 Eldorado Gold Corp are associated (or correlated) with Alliance Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Entertainment has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and Alliance Entertainment go up and down completely randomly.

Pair Corralation between Eldorado Gold and Alliance Entertainment

Considering the 90-day investment horizon Eldorado Gold is expected to generate 8.45 times less return on investment than Alliance Entertainment. But when comparing it to its historical volatility, Eldorado Gold Corp is 5.75 times less risky than Alliance Entertainment. It trades about 0.04 of its potential returns per unit of risk. Alliance Entertainment Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Alliance Entertainment Holding on December 20, 2024 and sell it today you would lose (6.60) from holding Alliance Entertainment Holding or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Eldorado Gold Corp  vs.  Alliance Entertainment Holding

Eldorado Gold Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eldorado Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Eldorado Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alliance Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 4 (%) 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.

Pair Trading with Eldorado Gold and Alliance Entertainment

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

The idea behind Eldorado Gold Corp and Alliance Entertainment 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.