Correlation Between Reading International and Luduson G

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

By analyzing existing cross correlation between Reading International B and Luduson G, you can compare the effects of market volatilities on Reading International and Luduson G 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 Luduson G. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reading International and Luduson G.

Diversification Opportunities for Reading International and Luduson G

0.84

Correlation Coefficient

Reading International  Luduson G

Very poor diversification

The 3 months correlation between Reading and Luduson is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Reading International B and Luduson G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luduson G 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 B are associated (or correlated) with Luduson G. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luduson G has no effect on the direction of Reading International i.e., Reading International and Luduson G go up and down completely randomly.

Pair Corralation between Reading International and Luduson G

Given the investment horizon of 90 days Reading International B is expected to under-perform the Luduson G. But the stock apears to be less risky and, when comparing its historical volatility, Reading International B is 4.2 times less risky than Luduson G. The stock trades about -0.11 of its potential returns per unit of risk. The Luduson G is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Luduson G on September 12, 2024 and sell it today you would lose (2.92) from holding Luduson G or give up 83.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Reading International B  vs.  Luduson G

Reading International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reading International B 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 forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Luduson G

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luduson G has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Luduson G is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Reading International and Luduson G

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

The idea behind Reading International B and Luduson G 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.