Correlation Between Reading International and Reservoir Media

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

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

Diversification Opportunities for Reading International and Reservoir Media

-0.56

Correlation Coefficient

Reading International  Reservoir Media

Excellent diversification

The 3 months correlation between Reading and Reservoir is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Reading International B and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 B 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 Reading International i.e., Reading International and Reservoir Media go up and down completely randomly.

Pair Corralation between Reading International and Reservoir Media

Given the investment horizon of 90 days Reading International B is expected to generate 4.03 times more return on investment than Reservoir Media. However, Reading International is 4.03 times more volatile than Reservoir Media. It trades about 0.0 of its potential returns per unit of risk. Reservoir Media is currently generating about -0.18 per unit of risk. If you would invest  794.00  in Reading International B on December 30, 2024 and sell it today you would lose (92.00) from holding Reading International B or give up 11.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

Reading International B  vs.  Reservoir Media

Reading International

Risk-Adjusted Performance

Very Weak

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

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 Reading International and Reservoir Media

The main advantage of trading using opposite Reading International and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reading International 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 Reading International B 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .