Correlation Between Alliance Select and Prime Media

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

By analyzing existing cross correlation between Alliance Select Foods and Prime Media Holdings, you can compare the effects of market volatilities on Alliance Select and Prime Media 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 Select with a short position of Prime Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Select and Prime Media.

Diversification Opportunities for Alliance Select and Prime Media

0.31

Correlation Coefficient

Alliance Select  Prime Media

Weak diversification

The 3 months correlation between Alliance and Prime is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Prime Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Media Holdings and Alliance Select 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 Select Foods are associated (or correlated) with Prime Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Media Holdings has no effect on the direction of Alliance Select i.e., Alliance Select and Prime Media go up and down completely randomly.

Pair Corralation between Alliance Select and Prime Media

Assuming the 90 days trading horizon Alliance Select Foods is expected to generate 0.8 times more return on investment than Prime Media. However, Alliance Select Foods is 1.25 times less risky than Prime Media. It trades about -0.07 of its potential returns per unit of risk. Prime Media Holdings is currently generating about -0.13 per unit of risk. If you would invest  41.00  in Alliance Select Foods on September 2, 2024 and sell it today you would lose (3.00) from holding Alliance Select Foods or give up 7.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	59.02%
Values	Daily Returns

Alliance Select Foods  vs.  Prime Media Holdings

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Prime Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alliance Select and Prime Media

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

The idea behind Alliance Select Foods and Prime Media Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.