Correlation Between Cinemark Holdings and Alliance Entertainment

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

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

Diversification Opportunities for Cinemark Holdings and Alliance Entertainment

0.82

Correlation Coefficient

Cinemark Holdings  Alliance Entertainment

Very poor diversification

The 3 months correlation between Cinemark and Alliance is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cinemark Holdings and Alliance Entertainment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Entertainment and Cinemark Holdings 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 Cinemark Holdings 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 Cinemark Holdings i.e., Cinemark Holdings and Alliance Entertainment go up and down completely randomly.

Pair Corralation between Cinemark Holdings and Alliance Entertainment

Considering the 90-day investment horizon Cinemark Holdings is expected to generate 4.98 times less return on investment than Alliance Entertainment. But when comparing it to its historical volatility, Cinemark Holdings is 14.84 times less risky than Alliance Entertainment. It trades about 0.36 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  15.00  in Alliance Entertainment Holding on September 2, 2024 and sell it today you would earn a total of  1.00  from holding Alliance Entertainment Holding or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Cinemark Holdings  vs.  Alliance Entertainment Holding

Cinemark Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cinemark Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cinemark Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Entertainment Holding are ranked lower than 14 (%) 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 Cinemark Holdings and Alliance Entertainment

The main advantage of trading using opposite Cinemark Holdings and Alliance Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cinemark Holdings 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 Cinemark Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.