Correlation Between Ituran Location and Reservoir Media

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

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

Diversification Opportunities for Ituran Location and Reservoir Media

0.71

Correlation Coefficient

Ituran Location  Reservoir Media

Poor diversification

The 3 months correlation between Ituran and Reservoir is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ituran Location and and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media and Ituran Location 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 Ituran Location and 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 Ituran Location i.e., Ituran Location and Reservoir Media go up and down completely randomly.

Pair Corralation between Ituran Location and Reservoir Media

Given the investment horizon of 90 days Ituran Location is expected to generate 1.94 times less return on investment than Reservoir Media. But when comparing it to its historical volatility, Ituran Location and is 1.73 times less risky than Reservoir Media. It trades about 0.16 of its potential returns per unit of risk. Reservoir Media is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  751.00  in Reservoir Media on September 5, 2024 and sell it today you would earn a total of  200.00  from holding Reservoir Media or generate 26.63% return on investment over 90 days.

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

Ituran Location and  vs.  Reservoir Media

Ituran Location

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ituran Location and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Ituran Location displayed solid returns over the last few months and may actually be approaching a breakup point.

Reservoir Media

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 13 (%) 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 Ituran Location and Reservoir Media

The main advantage of trading using opposite Ituran Location and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ituran Location 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 Ituran Location and 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.