Correlation Between Montauk Renewables and National CineMedia

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

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

Diversification Opportunities for Montauk Renewables and National CineMedia

0.21

Correlation Coefficient

Montauk Renewables  National CineMedia

Modest diversification

The 3 months correlation between Montauk and National is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and National CineMedia go up and down completely randomly.

Pair Corralation between Montauk Renewables and National CineMedia

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the National CineMedia. In addition to that, Montauk Renewables is 1.29 times more volatile than National CineMedia. It trades about -0.01 of its total potential returns per unit of risk. National CineMedia is currently generating about 0.08 per unit of volatility. If you would invest  429.00  in National CineMedia on October 22, 2024 and sell it today you would earn a total of  251.00  from holding National CineMedia or generate 58.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Montauk Renewables  vs.  National CineMedia

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Montauk Renewables and National CineMedia

The main advantage of trading using opposite Montauk Renewables and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Global Correlations module to find global opportunities by holding instruments from different markets.