Correlation Between First Ship and National CineMedia

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

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

Diversification Opportunities for First Ship and National CineMedia

0.0

Correlation Coefficient

First Ship  National CineMedia

Pay attention - limited upside

The 3 months correlation between First and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and First Ship 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 First Ship Lease 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 First Ship i.e., First Ship and National CineMedia go up and down completely randomly.

Pair Corralation between First Ship and National CineMedia

Assuming the 90 days horizon First Ship Lease is expected to generate 1.07 times more return on investment than National CineMedia. However, First Ship is 1.07 times more volatile than National CineMedia. It trades about 0.05 of its potential returns per unit of risk. National CineMedia is currently generating about 0.05 per unit of risk. If you would invest  2.50  in First Ship Lease on December 3, 2024 and sell it today you would earn a total of  1.50  from holding First Ship Lease or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.09%
Values	Daily Returns

First Ship Lease  vs.  National CineMedia

First Ship Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

National CineMedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Ship and National CineMedia

The main advantage of trading using opposite First Ship and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship 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 First Ship Lease 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.