Correlation Between National CineMedia and Dolphin Entertainment

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

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

Diversification Opportunities for National CineMedia and Dolphin Entertainment

0.12

Correlation Coefficient

National CineMedia  Dolphin Entertainment

Average diversification

The 3 months correlation between National and Dolphin is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Dolphin Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Entertainment 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 Dolphin Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Entertainment has no effect on the direction of National CineMedia i.e., National CineMedia and Dolphin Entertainment go up and down completely randomly.

Pair Corralation between National CineMedia and Dolphin Entertainment

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Dolphin Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 1.35 times less risky than Dolphin Entertainment. The stock trades about -0.05 of its potential returns per unit of risk. The Dolphin Entertainment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  104.00  in Dolphin Entertainment on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Dolphin Entertainment or generate 0.96% 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.  Dolphin Entertainment

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.

Dolphin Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dolphin Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Dolphin Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with National CineMedia and Dolphin Entertainment

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

The idea behind National CineMedia and Dolphin Entertainment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.