Correlation Between IQIYI and Alliance Entertainment

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

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

Diversification Opportunities for IQIYI and Alliance Entertainment

-0.56

Correlation Coefficient

IQIYI  Alliance Entertainment

Excellent diversification

The 3 months correlation between IQIYI and Alliance is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and IQIYI 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 iQIYI Inc 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 IQIYI i.e., IQIYI and Alliance Entertainment go up and down completely randomly.

Pair Corralation between IQIYI and Alliance Entertainment

Allowing for the 90-day total investment horizon IQIYI is expected to generate 14.24 times less return on investment than Alliance Entertainment. But when comparing it to its historical volatility, iQIYI Inc is 6.06 times less risky than Alliance Entertainment. It trades about 0.06 of its potential returns per unit of risk. Alliance Entertainment Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Alliance Entertainment Holding on October 26, 2024 and sell it today you would earn a total of  8.50  from holding Alliance Entertainment Holding or generate 50.0% return on investment over 90 days.

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

iQIYI Inc  vs.  Alliance Entertainment Holding

iQIYI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iQIYI Inc 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 basic 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.

Alliance Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Alliance Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IQIYI and Alliance Entertainment

The main advantage of trading using opposite IQIYI and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQIYI 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 iQIYI Inc 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.