Correlation Between Digital Media and National CineMedia

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

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

Diversification Opportunities for Digital Media and National CineMedia

-0.11

Correlation Coefficient

Digital Media  National CineMedia

Good diversification

The 3 months correlation between Digital and National is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Digital Media Solutions and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Digital 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 Digital Media Solutions are associated (or correlated) with National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Digital Media i.e., Digital Media and National CineMedia go up and down completely randomly.

Pair Corralation between Digital Media and National CineMedia

If you would invest  696.00  in National CineMedia on September 15, 2024 and sell it today you would earn a total of  41.00  from holding National CineMedia or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Digital Media Solutions  vs.  National CineMedia

Digital Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Digital Media is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National CineMedia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting primary indicators, National CineMedia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Digital Media and National CineMedia

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

The idea behind Digital Media Solutions and National CineMedia 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.