Correlation Between Hollywall Entertainment and Reading International

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

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

Diversification Opportunities for Hollywall Entertainment and Reading International

-0.15

Correlation Coefficient

Hollywall Entertainment  Reading International

Good diversification

The 3 months correlation between Hollywall and Reading is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hollywall Entertainment and Reading International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reading International and Hollywall 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 Hollywall Entertainment 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 Hollywall Entertainment i.e., Hollywall Entertainment and Reading International go up and down completely randomly.

Pair Corralation between Hollywall Entertainment and Reading International

Given the investment horizon of 90 days Hollywall Entertainment is expected to generate 8.34 times more return on investment than Reading International. However, Hollywall Entertainment is 8.34 times more volatile than Reading International. It trades about 0.2 of its potential returns per unit of risk. Reading International is currently generating about 0.01 per unit of risk. If you would invest  2.60  in Hollywall Entertainment on December 30, 2024 and sell it today you would earn a total of  7.40  from holding Hollywall Entertainment or generate 284.62% return on investment over 90 days.

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

Hollywall Entertainment  vs.  Reading International

Hollywall Entertainment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hollywall Entertainment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Hollywall Entertainment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Reading International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reading International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Reading International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hollywall Entertainment and Reading International

The main advantage of trading using opposite Hollywall Entertainment and Reading International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hollywall Entertainment 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 Hollywall Entertainment and Reading International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.