Correlation Between National CineMedia and Kuke Music

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

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

Diversification Opportunities for National CineMedia and Kuke Music

0.09

Correlation Coefficient

National CineMedia  Kuke Music

Significant diversification

The 3 months correlation between National and Kuke is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Kuke Music Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuke Music Holding 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 Kuke Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuke Music Holding has no effect on the direction of National CineMedia i.e., National CineMedia and Kuke Music go up and down completely randomly.

Pair Corralation between National CineMedia and Kuke Music

Given the investment horizon of 90 days National CineMedia is expected to generate 12.59 times less return on investment than Kuke Music. But when comparing it to its historical volatility, National CineMedia is 4.63 times less risky than Kuke Music. It trades about 0.07 of its potential returns per unit of risk. Kuke Music Holding is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Kuke Music Holding on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Kuke Music Holding or generate 37.14% 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.  Kuke Music Holding

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 fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Kuke Music Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuke Music Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Kuke Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Kuke Music

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

The idea behind National CineMedia and Kuke Music Holding 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.