Correlation Between National CineMedia and Dixons Carphone

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

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

Diversification Opportunities for National CineMedia and Dixons Carphone

-0.1

Correlation Coefficient

National CineMedia  Dixons Carphone

Good diversification

The 3 months correlation between National and Dixons is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone plc 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 Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of National CineMedia i.e., National CineMedia and Dixons Carphone go up and down completely randomly.

Pair Corralation between National CineMedia and Dixons Carphone

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Dixons Carphone. In addition to that, National CineMedia is 1.96 times more volatile than Dixons Carphone plc. It trades about -0.04 of its total potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.02 per unit of volatility. If you would invest  118.00  in Dixons Carphone plc on December 21, 2024 and sell it today you would earn a total of  1.00  from holding Dixons Carphone plc or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

National CineMedia  vs.  Dixons Carphone plc

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.

Dixons Carphone plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dixons Carphone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National CineMedia and Dixons Carphone

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

The idea behind National CineMedia and Dixons Carphone plc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.