Correlation Between Reservoir Media and Color Star

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

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

Diversification Opportunities for Reservoir Media and Color Star

-0.23

Correlation Coefficient

Reservoir Media  Color Star

Very good diversification

The 3 months correlation between Reservoir and Color is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and Color Star Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Color Star Technology 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 Color Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Color Star Technology has no effect on the direction of Reservoir Media i.e., Reservoir Media and Color Star go up and down completely randomly.

Pair Corralation between Reservoir Media and Color Star

Given the investment horizon of 90 days Reservoir Media is expected to under-perform the Color Star. But the stock apears to be less risky and, when comparing its historical volatility, Reservoir Media is 2.42 times less risky than Color Star. The stock trades about -0.02 of its potential returns per unit of risk. The Color Star Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Color Star Technology on March 15, 2024 and sell it today you would earn a total of  0.00  from holding Color Star Technology or generate 0.0% return on investment over 90 days.

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

Reservoir Media  vs.  Color Star Technology

Reservoir Media

Risk-Adjusted Performance

0 of 100

Weak

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

Color Star Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Color Star Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental 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 Color Star

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

The idea behind Reservoir Media and Color Star Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.