Correlation Between Reservoir Media and LENSAR

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

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

Diversification Opportunities for Reservoir Media and LENSAR

0.65

Correlation Coefficient

Reservoir Media  LENSAR

Poor diversification

The 3 months correlation between Reservoir and LENSAR is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR 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 LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Reservoir Media i.e., Reservoir Media and LENSAR go up and down completely randomly.

Pair Corralation between Reservoir Media and LENSAR

Given the investment horizon of 90 days Reservoir Media is expected to generate 10.46 times less return on investment than LENSAR. But when comparing it to its historical volatility, Reservoir Media is 1.86 times less risky than LENSAR. It trades about 0.02 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  328.00  in LENSAR Inc on October 9, 2024 and sell it today you would earn a total of  537.00  from holding LENSAR Inc or generate 163.72% return on investment over 90 days.

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

Reservoir Media  vs.  LENSAR Inc

Reservoir Media

Risk-Adjusted Performance

0 of 100

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 relatively invariable basic indicators, Reservoir Media is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

LENSAR Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reservoir Media and LENSAR

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

The idea behind Reservoir Media and LENSAR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.