Correlation Between Alliance Entertainment and Color Star

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

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

Diversification Opportunities for Alliance Entertainment and Color Star

-0.58

Correlation Coefficient

Alliance Entertainment  Color Star

Excellent diversification

The 3 months correlation between Alliance and Color is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Entertainment Holding and Color Star Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Color Star Technology and Alliance Entertainment 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 Alliance Entertainment Holding are associated (or correlated) with Color Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Color Star Technology has no effect on the direction of Alliance Entertainment i.e., Alliance Entertainment and Color Star go up and down completely randomly.

Pair Corralation between Alliance Entertainment and Color Star

Assuming the 90 days horizon Alliance Entertainment Holding is expected to generate 4.08 times more return on investment than Color Star. However, Alliance Entertainment is 4.08 times more volatile than Color Star Technology. It trades about 0.1 of its potential returns per unit of risk. Color Star Technology is currently generating about -0.05 per unit of risk. If you would invest  6.60  in Alliance Entertainment Holding on January 29, 2024 and sell it today you would lose (4.58) from holding Alliance Entertainment Holding or give up 69.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	29.26%
Values	Daily Returns

Alliance Entertainment Holding  vs.  Color Star Technology

Alliance Entertainment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Alliance Entertainment showed solid returns over the last few months and may actually be approaching a breakup point.

Color Star Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Color Star Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Alliance Entertainment and Color Star

The main advantage of trading using opposite Alliance Entertainment and Color Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Entertainment position performs unexpectedly, Color Star 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 Color Star will offset losses from the drop in Color Star's long position.

The idea behind Alliance Entertainment Holding and Color Star Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.