Correlation Between National CineMedia and Chongqing Rural

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

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

Diversification Opportunities for National CineMedia and Chongqing Rural

0.08

Correlation Coefficient

National CineMedia  Chongqing Rural

Significant diversification

The 3 months correlation between National and Chongqing is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of National CineMedia i.e., National CineMedia and Chongqing Rural go up and down completely randomly.

Pair Corralation between National CineMedia and Chongqing Rural

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Chongqing Rural. In addition to that, National CineMedia is 1.16 times more volatile than Chongqing Rural Commercial. It trades about -0.05 of its total potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.13 per unit of volatility. If you would invest  2,592  in Chongqing Rural Commercial on December 22, 2024 and sell it today you would earn a total of  595.00  from holding Chongqing Rural Commercial or generate 22.96% return on investment over 90 days.

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

National CineMedia  vs.  Chongqing Rural Commercial

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.

Chongqing Rural Comm

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Chongqing Rural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Chongqing Rural

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

The idea behind National CineMedia and Chongqing Rural Commercial 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.