Correlation Between National CineMedia and Entergy Louisiana

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

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

Diversification Opportunities for National CineMedia and Entergy Louisiana

0.31

Correlation Coefficient

National CineMedia  Entergy Louisiana

Weak diversification

The 3 months correlation between National and Entergy is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Entergy Louisiana LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Louisiana LLC 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 Entergy Louisiana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Louisiana LLC has no effect on the direction of National CineMedia i.e., National CineMedia and Entergy Louisiana go up and down completely randomly.

Pair Corralation between National CineMedia and Entergy Louisiana

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Entergy Louisiana. In addition to that, National CineMedia is 3.9 times more volatile than Entergy Louisiana LLC. It trades about -0.03 of its total potential returns per unit of risk. Entergy Louisiana LLC is currently generating about 0.01 per unit of volatility. If you would invest  2,084  in Entergy Louisiana LLC on December 26, 2024 and sell it today you would earn a total of  3.00  from holding Entergy Louisiana LLC or generate 0.14% return on investment over 90 days.

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

National CineMedia  vs.  Entergy Louisiana LLC

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.

Entergy Louisiana LLC

Risk-Adjusted Performance

Weak

Over the last 90 days Entergy Louisiana LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Entergy Louisiana is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National CineMedia and Entergy Louisiana

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

The idea behind National CineMedia and Entergy Louisiana LLC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.