Correlation Between Telus Corp and Alliance Entertainment

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

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

Diversification Opportunities for Telus Corp and Alliance Entertainment

-0.54

Correlation Coefficient

Telus Corp  Alliance Entertainment

Excellent diversification

The 3 months correlation between Telus and Alliance is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Telus Corp and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Telus Corp 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 Telus Corp 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 Telus Corp i.e., Telus Corp and Alliance Entertainment go up and down completely randomly.

Pair Corralation between Telus Corp and Alliance Entertainment

Allowing for the 90-day total investment horizon Telus Corp is expected to generate 13.3 times less return on investment than Alliance Entertainment. But when comparing it to its historical volatility, Telus Corp is 15.43 times less risky than Alliance Entertainment. It trades about 0.14 of its potential returns per unit of risk. Alliance Entertainment Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Alliance Entertainment Holding on December 19, 2024 and sell it today you would earn a total of  8.00  from holding Alliance Entertainment Holding or generate 44.44% return on investment over 90 days.

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

Telus Corp  vs.  Alliance Entertainment Holding

Telus Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telus Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Telus Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alliance Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Alliance Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telus Corp and Alliance Entertainment

The main advantage of trading using opposite Telus Corp and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telus Corp 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 Telus Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.