Correlation Between National CineMedia and Carters

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

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

Diversification Opportunities for National CineMedia and Carters

0.18

Correlation Coefficient

National CineMedia  Carters

Average diversification

The 3 months correlation between National and Carters is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of National CineMedia i.e., National CineMedia and Carters go up and down completely randomly.

Pair Corralation between National CineMedia and Carters

Given the investment horizon of 90 days National CineMedia is expected to generate 4.0 times more return on investment than Carters. However, National CineMedia is 4.0 times more volatile than Carters. It trades about 0.05 of its potential returns per unit of risk. Carters is currently generating about -0.03 per unit of risk. If you would invest  298.00  in National CineMedia on October 13, 2024 and sell it today you would earn a total of  303.00  from holding National CineMedia or generate 101.68% 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.  Carters

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 latest conflicting 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.

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with National CineMedia and Carters

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

The idea behind National CineMedia and Carters 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.