Correlation Between Warner Bros and Reading International

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

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

Diversification Opportunities for Warner Bros and Reading International

-0.29

Correlation Coefficient

Warner Bros  Reading International

Very good diversification

The 3 months correlation between Warner and Reading is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and Reading International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reading International and Warner Bros 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 Warner Bros Discovery are associated (or correlated) with Reading International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reading International has no effect on the direction of Warner Bros i.e., Warner Bros and Reading International go up and down completely randomly.

Pair Corralation between Warner Bros and Reading International

Considering the 90-day investment horizon Warner Bros is expected to generate 9.43 times less return on investment than Reading International. But when comparing it to its historical volatility, Warner Bros Discovery is 1.41 times less risky than Reading International. It trades about 0.01 of its potential returns per unit of risk. Reading International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Reading International on December 28, 2024 and sell it today you would earn a total of  5.00  from holding Reading International or generate 3.91% return on investment over 90 days.

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

Warner Bros Discovery  vs.  Reading International

Warner Bros Discovery

Risk-Adjusted Performance

Insignificant

Over the last 90 days Warner Bros Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Reading International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reading International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Reading International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Warner Bros and Reading International

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

The idea behind Warner Bros Discovery and Reading International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.