Correlation Between Reading International and Kuke Music

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

By analyzing existing cross correlation between Reading International and Kuke Music Holding, you can compare the effects of market volatilities on Reading International and Kuke Music 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 Kuke Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reading International and Kuke Music.

Diversification Opportunities for Reading International and Kuke Music

0.13

Correlation Coefficient

Reading International  Kuke Music

Average diversification

The 3 months correlation between Reading and Kuke is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Reading International and Kuke Music Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuke Music Holding 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 Kuke Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuke Music Holding has no effect on the direction of Reading International i.e., Reading International and Kuke Music go up and down completely randomly.

Pair Corralation between Reading International and Kuke Music

Considering the 90-day investment horizon Reading International is expected to generate 0.49 times more return on investment than Kuke Music. However, Reading International is 2.06 times less risky than Kuke Music. It trades about -0.15 of its potential returns per unit of risk. Kuke Music Holding is currently generating about -0.3 per unit of risk. If you would invest  158.00  in Reading International on December 2, 2024 and sell it today you would lose (14.00) from holding Reading International or give up 8.86% of portfolio value over 90 days.

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

Reading International  vs.  Kuke Music Holding

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 latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Kuke Music Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kuke Music Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Kuke Music is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Reading International and Kuke Music

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

The idea behind Reading International and Kuke Music Holding 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.