Correlation Between SNDL and Alliance Entertainment

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

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

Diversification Opportunities for SNDL and Alliance Entertainment

0.49

Correlation Coefficient

SNDL  Alliance Entertainment

Very weak diversification

The 3 months correlation between SNDL and Alliance is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SNDL 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 SNDL 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 SNDL 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 SNDL i.e., SNDL and Alliance Entertainment go up and down completely randomly.

Pair Corralation between SNDL and Alliance Entertainment

Given the investment horizon of 90 days SNDL Inc is expected to under-perform the Alliance Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, SNDL Inc is 6.31 times less risky than Alliance Entertainment. The stock trades about -0.07 of its potential returns per unit of risk. The Alliance Entertainment Holding is currently generating about 0.04 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 (11.00) from holding Alliance Entertainment Holding or give up 33.33% of portfolio value over 90 days.

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

SNDL Inc  vs.  Alliance Entertainment Holding

SNDL Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company 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 SNDL and Alliance Entertainment

The main advantage of trading using opposite SNDL and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNDL 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 SNDL 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.