Correlation Between National CineMedia and Vita Coco

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

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

Diversification Opportunities for National CineMedia and Vita Coco

0.2

Correlation Coefficient

National CineMedia  Vita Coco

Modest diversification

The 3 months correlation between National and Vita is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of National CineMedia i.e., National CineMedia and Vita Coco go up and down completely randomly.

Pair Corralation between National CineMedia and Vita Coco

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Vita Coco. In addition to that, National CineMedia is 1.74 times more volatile than Vita Coco. It trades about -0.11 of its total potential returns per unit of risk. Vita Coco is currently generating about -0.04 per unit of volatility. If you would invest  3,634  in Vita Coco on September 26, 2024 and sell it today you would lose (35.00) from holding Vita Coco or give up 0.96% of portfolio value over 90 days.

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

National CineMedia  vs.  Vita Coco

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.

Vita Coco

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Vita Coco

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

The idea behind National CineMedia and Vita Coco 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.