Correlation Between INEO Tech and National CineMedia

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

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

Diversification Opportunities for INEO Tech and National CineMedia

0.4

Correlation Coefficient

INEO Tech  National CineMedia

Very weak diversification

The 3 months correlation between INEO and National is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding INEO Tech Corp and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and INEO Tech 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 INEO Tech Corp 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 INEO Tech i.e., INEO Tech and National CineMedia go up and down completely randomly.

Pair Corralation between INEO Tech and National CineMedia

Assuming the 90 days horizon INEO Tech Corp is expected to generate 2.94 times more return on investment than National CineMedia. However, INEO Tech is 2.94 times more volatile than National CineMedia. It trades about 0.02 of its potential returns per unit of risk. National CineMedia is currently generating about -0.05 per unit of risk. If you would invest  3.53  in INEO Tech Corp on December 29, 2024 and sell it today you would lose (0.53) from holding INEO Tech Corp or give up 15.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

INEO Tech Corp  vs.  National CineMedia

INEO Tech Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INEO Tech Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INEO Tech reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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 INEO Tech and National CineMedia

The main advantage of trading using opposite INEO Tech and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INEO Tech 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 INEO Tech Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..