Correlation Between Reading International and Paramount Global

Can any of the company-specific risk be diversified away by investing in both Reading International and Paramount Global 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 Paramount Global 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 Paramount Global Class, you can compare the effects of market volatilities on Reading International and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reading International and Paramount Global.

Diversification Opportunities for Reading International and Paramount Global

-0.34

Correlation Coefficient

Reading International  Paramount Global

Very good diversification

The 3 months correlation between Reading and Paramount is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Reading International B and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Reading International i.e., Reading International and Paramount Global go up and down completely randomly.

Pair Corralation between Reading International and Paramount Global

Given the investment horizon of 90 days Reading International B is expected to under-perform the Paramount Global. In addition to that, Reading International is 5.53 times more volatile than Paramount Global Class. It trades about -0.06 of its total potential returns per unit of risk. Paramount Global Class is currently generating about 0.05 per unit of volatility. If you would invest  2,202  in Paramount Global Class on August 31, 2024 and sell it today you would earn a total of  74.00  from holding Paramount Global Class or generate 3.36% return on investment over 90 days.

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

Reading International B  vs.  Paramount Global Class

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Paramount Global Class

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reading International and Paramount Global

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

The idea behind Reading International B and Paramount Global Class 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.