Correlation Between Kellanova and Alliance Entertainment

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

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

Diversification Opportunities for Kellanova and Alliance Entertainment

-0.25

Correlation Coefficient

Kellanova  Alliance Entertainment

Very good diversification

The 3 months correlation between Kellanova and Alliance is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Kellanova 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 Kellanova 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 Kellanova i.e., Kellanova and Alliance Entertainment go up and down completely randomly.

Pair Corralation between Kellanova and Alliance Entertainment

Taking into account the 90-day investment horizon Kellanova is expected to generate 18.54 times less return on investment than Alliance Entertainment. But when comparing it to its historical volatility, Kellanova is 94.89 times less risky than Alliance Entertainment. It trades about 0.26 of its potential returns per unit of risk. Alliance Entertainment Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Alliance Entertainment Holding on December 21, 2024 and sell it today you would lose (10.60) from holding Alliance Entertainment Holding or give up 28.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.92%
Values	Daily Returns

Kellanova  vs.  Alliance Entertainment Holding

Kellanova

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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 3 (%) 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 Kellanova and Alliance Entertainment

The main advantage of trading using opposite Kellanova and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova 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 Kellanova 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.