Correlation Between National CineMedia and CurrentC Power

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

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

Diversification Opportunities for National CineMedia and CurrentC Power

0.26

Correlation Coefficient

National CineMedia  CurrentC Power

Modest diversification

The 3 months correlation between National and CurrentC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and CurrentC Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CurrentC Power and National CineMedia 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 National CineMedia are associated (or correlated) with CurrentC Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CurrentC Power has no effect on the direction of National CineMedia i.e., National CineMedia and CurrentC Power go up and down completely randomly.

Pair Corralation between National CineMedia and CurrentC Power

Given the investment horizon of 90 days National CineMedia is expected to under-perform the CurrentC Power. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 31.24 times less risky than CurrentC Power. The stock trades about -0.05 of its potential returns per unit of risk. The CurrentC Power is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  18.00  in CurrentC Power on December 21, 2024 and sell it today you would lose (12.30) from holding CurrentC Power or give up 68.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

National CineMedia  vs.  CurrentC Power

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.

CurrentC Power

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CurrentC Power are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, CurrentC Power showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and CurrentC Power

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

The idea behind National CineMedia and CurrentC Power 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.