Correlation Between Reservoir Media and Reading International

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

By analyzing existing cross correlation between Reservoir Media and Reading International B, you can compare the effects of market volatilities on Reservoir Media and Reading International 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 Reservoir Media with a short position of Reading International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reservoir Media and Reading International.

Diversification Opportunities for Reservoir Media and Reading International

0.06

Correlation Coefficient

Reservoir Media  Reading International

Significant diversification

The 3 months correlation between Reservoir and Reading is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Reading International B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reading International and Reservoir Media 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 Reservoir Media are associated (or correlated) with Reading International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reading International has no effect on the direction of Reservoir Media i.e., Reservoir Media and Reading International go up and down completely randomly.

Pair Corralation between Reservoir Media and Reading International

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.54 times more return on investment than Reading International. However, Reservoir Media is 1.87 times less risky than Reading International. It trades about -0.15 of its potential returns per unit of risk. Reading International B is currently generating about -0.17 per unit of risk. If you would invest  856.00  in Reservoir Media on March 4, 2024 and sell it today you would lose (52.00) from holding Reservoir Media or give up 6.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Reservoir Media  vs.  Reading International B

Reservoir Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Reservoir Media may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Reading International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reading International B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Reading International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reservoir Media and Reading International

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

The idea behind Reservoir Media and Reading International B 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.