Correlation Between Reservoir Media and Nathans Famous

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

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

Diversification Opportunities for Reservoir Media and Nathans Famous

0.64

Correlation Coefficient

Reservoir Media  Nathans Famous

Poor diversification

The 3 months correlation between Reservoir and Nathans is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous 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 Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Reservoir Media i.e., Reservoir Media and Nathans Famous go up and down completely randomly.

Pair Corralation between Reservoir Media and Nathans Famous

Given the investment horizon of 90 days Reservoir Media is expected to generate 1.15 times more return on investment than Nathans Famous. However, Reservoir Media is 1.15 times more volatile than Nathans Famous. It trades about -0.02 of its potential returns per unit of risk. Nathans Famous is currently generating about -0.04 per unit of risk. If you would invest  855.00  in Reservoir Media on October 25, 2024 and sell it today you would lose (41.00) from holding Reservoir Media or give up 4.8% of portfolio value over 90 days.

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

Reservoir Media  vs.  Nathans Famous

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Reservoir Media and Nathans Famous

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

The idea behind Reservoir Media and Nathans Famous 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.