Correlation Between Reservoir Media and AMC Entertainment

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

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

Diversification Opportunities for Reservoir Media and AMC Entertainment

0.22

Correlation Coefficient

Reservoir Media  AMC Entertainment

Modest diversification

The 3 months correlation between Reservoir and AMC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and Reservoir Media 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 Reservoir Media are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Reservoir Media i.e., Reservoir Media and AMC Entertainment go up and down completely randomly.

Pair Corralation between Reservoir Media and AMC Entertainment

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.84 times more return on investment than AMC Entertainment. However, Reservoir Media is 1.2 times less risky than AMC Entertainment. It trades about 0.15 of its potential returns per unit of risk. AMC Entertainment Holdings is currently generating about -0.04 per unit of risk. If you would invest  747.00  in Reservoir Media on September 22, 2024 and sell it today you would earn a total of  179.00  from holding Reservoir Media or generate 23.96% return on investment over 90 days.

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

Reservoir Media  vs.  AMC Entertainment Holdings

Reservoir Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 11 (%) 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.

AMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMC Entertainment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Reservoir Media and AMC Entertainment

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

The idea behind Reservoir Media and AMC Entertainment Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.