Correlation Between Interpublic Group and Reservoir Media

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

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

Diversification Opportunities for Interpublic Group and Reservoir Media

-0.42

Correlation Coefficient

Interpublic Group  Reservoir Media

Very good diversification

The 3 months correlation between Interpublic and Reservoir is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Interpublic Group of and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media and Interpublic Group 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 Interpublic Group of 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 Interpublic Group i.e., Interpublic Group and Reservoir Media go up and down completely randomly.

Pair Corralation between Interpublic Group and Reservoir Media

Considering the 90-day investment horizon Interpublic Group of is expected to under-perform the Reservoir Media. But the stock apears to be less risky and, when comparing its historical volatility, Interpublic Group of is 1.41 times less risky than Reservoir Media. The stock trades about -0.02 of its potential returns per unit of risk. The Reservoir Media is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  741.00  in Reservoir Media on September 4, 2024 and sell it today you would earn a total of  221.00  from holding Reservoir Media or generate 29.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Interpublic Group of  vs.  Reservoir Media

Interpublic Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interpublic Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Interpublic Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Reservoir Media

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 15 (%) 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.

Pair Trading with Interpublic Group and Reservoir Media

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.