Correlation Between National CineMedia and Caravelle International

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

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

Diversification Opportunities for National CineMedia and Caravelle International

0.51

Correlation Coefficient

National CineMedia  Caravelle International

Very weak diversification

The 3 months correlation between National and Caravelle is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International 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 Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of National CineMedia i.e., National CineMedia and Caravelle International go up and down completely randomly.

Pair Corralation between National CineMedia and Caravelle International

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Caravelle International. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 3.17 times less risky than Caravelle International. The stock trades about -0.05 of its potential returns per unit of risk. The Caravelle International Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Caravelle International Group on December 22, 2024 and sell it today you would lose (62.00) from holding Caravelle International Group or give up 24.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

National CineMedia  vs.  Caravelle International Group

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.

Caravelle International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caravelle International Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Caravelle International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National CineMedia and Caravelle International

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

The idea behind National CineMedia and Caravelle International Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..