Correlation Between Advance Auto and Alliance Entertainment
Can any of the company-specific risk be diversified away by investing in both Advance Auto 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 Advance Auto and Alliance Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advance Auto Parts and Alliance Entertainment Holding, you can compare the effects of market volatilities on Advance Auto 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 Advance Auto with a short position of Alliance Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advance Auto and Alliance Entertainment.
Diversification Opportunities for Advance Auto and Alliance Entertainment
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Advance and Alliance is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Advance Auto Parts and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Advance Auto 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 Advance Auto Parts 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 Advance Auto i.e., Advance Auto and Alliance Entertainment go up and down completely randomly.
Pair Corralation between Advance Auto and Alliance Entertainment
Considering the 90-day investment horizon Advance Auto Parts is expected to under-perform the Alliance Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Advance Auto Parts is 2.38 times less risky than Alliance Entertainment. The stock trades about -0.03 of its potential returns per unit of risk. The Alliance Entertainment Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 300.00 in Alliance Entertainment Holding on August 31, 2024 and sell it today you would earn a total of 209.00 from holding Alliance Entertainment Holding or generate 69.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advance Auto Parts vs. Alliance Entertainment Holding
Performance |
| Timeline |
| Advance Auto Parts |
| Alliance Entertainment |
Advance Auto and Alliance Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advance Auto and Alliance Entertainment
The main advantage of trading using opposite Advance Auto and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advance Auto 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.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
| Alliance Entertainment vs. CF Industries Holdings | Alliance Entertainment vs. Sandstorm Gold Ltd | Alliance Entertainment vs. Uranium Energy Corp | Alliance Entertainment vs. The Mosaic |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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