Correlation Between AMC Entertainment and Reservoir Media

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

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

Diversification Opportunities for AMC Entertainment and Reservoir Media

0.69

Correlation Coefficient

AMC Entertainment  Reservoir Media

Poor diversification

The 3 months correlation between AMC and Reservoir is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AMC Entertainment Holdings and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media and AMC 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 AMC Entertainment Holdings are associated (or correlated) with Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of AMC Entertainment i.e., AMC Entertainment and Reservoir Media go up and down completely randomly.

Pair Corralation between AMC Entertainment and Reservoir Media

Considering the 90-day investment horizon AMC Entertainment Holdings is expected to under-perform the Reservoir Media. In addition to that, AMC Entertainment is 1.57 times more volatile than Reservoir Media. It trades about -0.17 of its total potential returns per unit of risk. Reservoir Media is currently generating about -0.19 per unit of volatility. If you would invest  904.00  in Reservoir Media on December 28, 2024 and sell it today you would lose (179.00) from holding Reservoir Media or give up 19.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AMC Entertainment Holdings  vs.  Reservoir Media

AMC Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMC Entertainment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Reservoir Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with AMC Entertainment and Reservoir Media

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

The idea behind AMC Entertainment Holdings and Reservoir Media 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.