Correlation Between Reading International and Manchester United

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

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

Diversification Opportunities for Reading International and Manchester United

-0.31

Correlation Coefficient

Reading International  Manchester United

Very good diversification

The 3 months correlation between Reading and Manchester is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Reading International and Manchester United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manchester United and Reading International 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 Reading International are associated (or correlated) with Manchester United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manchester United has no effect on the direction of Reading International i.e., Reading International and Manchester United go up and down completely randomly.

Pair Corralation between Reading International and Manchester United

Considering the 90-day investment horizon Reading International is expected to under-perform the Manchester United. In addition to that, Reading International is 2.67 times more volatile than Manchester United. It trades about -0.07 of its total potential returns per unit of risk. Manchester United is currently generating about 0.07 per unit of volatility. If you would invest  1,599  in Manchester United on October 1, 2024 and sell it today you would earn a total of  102.00  from holding Manchester United or generate 6.38% return on investment over 90 days.

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

Reading International  vs.  Manchester United

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.

Manchester United

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Manchester United are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Manchester United may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Reading International and Manchester United

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

The idea behind Reading International and Manchester United 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.