Correlation Between Reservoir Media and Baozun

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

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

Diversification Opportunities for Reservoir Media and Baozun

0.03

Correlation Coefficient

Reservoir Media  Baozun

Significant diversification

The 3 months correlation between Reservoir and Baozun is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc and Reservoir Media 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 Reservoir Media are associated (or correlated) with Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Reservoir Media i.e., Reservoir Media and Baozun go up and down completely randomly.

Pair Corralation between Reservoir Media and Baozun

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.53 times more return on investment than Baozun. However, Reservoir Media is 1.88 times less risky than Baozun. It trades about 0.09 of its potential returns per unit of risk. Baozun Inc is currently generating about 0.01 per unit of risk. If you would invest  592.00  in Reservoir Media on September 4, 2024 and sell it today you would earn a total of  359.00  from holding Reservoir Media or generate 60.64% return on investment over 90 days.

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

Reservoir Media  vs.  Baozun Inc

Reservoir Media

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Baozun Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Baozun displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reservoir Media and Baozun

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

The idea behind Reservoir Media and Baozun 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.