Correlation Between IQIYI and Reading International

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

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

Diversification Opportunities for IQIYI and Reading International

0.39

Correlation Coefficient

IQIYI  Reading International

Weak diversification

The 3 months correlation between IQIYI and Reading is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Reading International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reading International and IQIYI 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 iQIYI Inc 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 IQIYI i.e., IQIYI and Reading International go up and down completely randomly.

Pair Corralation between IQIYI and Reading International

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 1.08 times more return on investment than Reading International. However, IQIYI is 1.08 times more volatile than Reading International. It trades about 0.04 of its potential returns per unit of risk. Reading International is currently generating about -0.02 per unit of risk. If you would invest  202.00  in iQIYI Inc on September 22, 2024 and sell it today you would earn a total of  3.00  from holding iQIYI Inc or generate 1.49% return on investment over 90 days.

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

iQIYI Inc  vs.  Reading International

iQIYI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iQIYI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IQIYI is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Reading International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reading International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with IQIYI and Reading International

The main advantage of trading using opposite IQIYI and Reading International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQIYI 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 iQIYI Inc 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.