Correlation Between Reservoir Media and IQIYI

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

By analyzing existing cross correlation between Reservoir Media and iQIYI Inc, you can compare the effects of market volatilities on Reservoir Media and IQIYI 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 IQIYI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reservoir Media and IQIYI.

Diversification Opportunities for Reservoir Media and IQIYI

-0.6

Correlation Coefficient

Reservoir Media  IQIYI

Excellent diversification

The 3 months correlation between Reservoir and IQIYI is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc 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 IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Reservoir Media i.e., Reservoir Media and IQIYI go up and down completely randomly.

Pair Corralation between Reservoir Media and IQIYI

Given the investment horizon of 90 days Reservoir Media is expected to generate 0.5 times more return on investment than IQIYI. However, Reservoir Media is 2.02 times less risky than IQIYI. It trades about 0.15 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.01 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Reservoir Media  vs.  iQIYI Inc

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.

iQIYI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iQIYI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IQIYI is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Reservoir Media and IQIYI

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

The idea behind Reservoir Media and iQIYI Inc 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.