Correlation Between National CineMedia and CMG Holdings

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

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

Diversification Opportunities for National CineMedia and CMG Holdings

-0.11

Correlation Coefficient

National CineMedia  CMG Holdings

Good diversification

The 3 months correlation between National and CMG is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and CMG Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMG Holdings Group 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 CMG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMG Holdings Group has no effect on the direction of National CineMedia i.e., National CineMedia and CMG Holdings go up and down completely randomly.

Pair Corralation between National CineMedia and CMG Holdings

Given the investment horizon of 90 days National CineMedia is expected to generate 3.09 times less return on investment than CMG Holdings. But when comparing it to its historical volatility, National CineMedia is 3.47 times less risky than CMG Holdings. It trades about 0.06 of its potential returns per unit of risk. CMG Holdings Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.20  in CMG Holdings Group on October 3, 2024 and sell it today you would lose (0.06) from holding CMG Holdings Group or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.75%
Values	Daily Returns

National CineMedia  vs.  CMG Holdings Group

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.

CMG Holdings Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMG Holdings Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, CMG Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and CMG Holdings

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

The idea behind National CineMedia and CMG Holdings Group 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.