Correlation Between National CineMedia and Awilco Drilling

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

By analyzing existing cross correlation between National CineMedia and Awilco Drilling PLC, you can compare the effects of market volatilities on National CineMedia and Awilco Drilling 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 Awilco Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of National CineMedia and Awilco Drilling.

Diversification Opportunities for National CineMedia and Awilco Drilling

0.64

Correlation Coefficient

National CineMedia  Awilco Drilling

Poor diversification

The 3 months correlation between National and Awilco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Awilco Drilling PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco Drilling PLC 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 Awilco Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco Drilling PLC has no effect on the direction of National CineMedia i.e., National CineMedia and Awilco Drilling go up and down completely randomly.

Pair Corralation between National CineMedia and Awilco Drilling

Given the investment horizon of 90 days National CineMedia is expected to generate 5.82 times less return on investment than Awilco Drilling. But when comparing it to its historical volatility, National CineMedia is 6.25 times less risky than Awilco Drilling. It trades about 0.05 of its potential returns per unit of risk. Awilco Drilling PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Awilco Drilling PLC on October 23, 2024 and sell it today you would lose (819.00) from holding Awilco Drilling PLC or give up 81.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

National CineMedia  vs.  Awilco Drilling PLC

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.

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with National CineMedia and Awilco Drilling

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

The idea behind National CineMedia and Awilco Drilling PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.