Correlation Between Reading International and Gaia

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

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

Diversification Opportunities for Reading International and Gaia

0.78

Correlation Coefficient

Reading International  Gaia

Poor diversification

The 3 months correlation between Reading and Gaia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Reading International and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc and Reading International 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 Reading International are associated (or correlated) with Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of Reading International i.e., Reading International and Gaia go up and down completely randomly.

Pair Corralation between Reading International and Gaia

Considering the 90-day investment horizon Reading International is expected to generate 1.05 times more return on investment than Gaia. However, Reading International is 1.05 times more volatile than Gaia Inc. It trades about 0.03 of its potential returns per unit of risk. Gaia Inc is currently generating about -0.03 per unit of risk. If you would invest  128.00  in Reading International on December 28, 2024 and sell it today you would earn a total of  5.00  from holding Reading International or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Reading International  vs.  Gaia Inc

Reading International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reading International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Reading International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gaia Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gaia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Reading International and Gaia

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

The idea behind Reading International and Gaia Inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.