Correlation Between Enersys and Reservoir Media

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

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

Diversification Opportunities for Enersys and Reservoir Media

-0.49

Correlation Coefficient

Enersys  Reservoir Media

Very good diversification

The 3 months correlation between Enersys and Reservoir is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Enersys and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media and Enersys 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 Enersys 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 Enersys i.e., Enersys and Reservoir Media go up and down completely randomly.

Pair Corralation between Enersys and Reservoir Media

Considering the 90-day investment horizon Enersys is expected to under-perform the Reservoir Media. But the stock apears to be less risky and, when comparing its historical volatility, Enersys is 1.99 times less risky than Reservoir Media. The stock trades about -0.17 of its potential returns per unit of risk. The Reservoir Media is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  943.00  in Reservoir Media on September 23, 2024 and sell it today you would lose (17.00) from holding Reservoir Media or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enersys  vs.  Reservoir Media

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Reservoir Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enersys and Reservoir Media

The main advantage of trading using opposite Enersys and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enersys 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 Enersys 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.