Correlation Between Raytech Holding and Alliance Entertainment

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

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

Diversification Opportunities for Raytech Holding and Alliance Entertainment

0.43

Correlation Coefficient

Raytech Holding  Alliance Entertainment

Very weak diversification

The 3 months correlation between Raytech and Alliance is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Raytech Holding 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 Raytech Holding Limited 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 Raytech Holding i.e., Raytech Holding and Alliance Entertainment go up and down completely randomly.

Pair Corralation between Raytech Holding and Alliance Entertainment

Considering the 90-day investment horizon Raytech Holding Limited is expected to generate 1.61 times more return on investment than Alliance Entertainment. However, Raytech Holding is 1.61 times more volatile than Alliance Entertainment Holding. It trades about 0.05 of its potential returns per unit of risk. Alliance Entertainment Holding is currently generating about -0.07 per unit of risk. If you would invest  113.00  in Raytech Holding Limited on December 23, 2024 and sell it today you would earn a total of  1.00  from holding Raytech Holding Limited or generate 0.88% return on investment over 90 days.

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

Raytech Holding Limited  vs.  Alliance Entertainment Holding

Raytech Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Raytech Holding Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Raytech Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Entertainment Holding 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Raytech Holding and Alliance Entertainment

The main advantage of trading using opposite Raytech Holding and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytech Holding 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 Raytech Holding Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.