Correlation Between National CineMedia and MusclePharm

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

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

Diversification Opportunities for National CineMedia and MusclePharm

-0.3

Correlation Coefficient

National CineMedia  MusclePharm

Very good diversification

The 3 months correlation between National and MusclePharm is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and MusclePharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MusclePharm 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 MusclePharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MusclePharm has no effect on the direction of National CineMedia i.e., National CineMedia and MusclePharm go up and down completely randomly.

Pair Corralation between National CineMedia and MusclePharm

Given the investment horizon of 90 days National CineMedia is expected to generate 10.92 times less return on investment than MusclePharm. But when comparing it to its historical volatility, National CineMedia is 8.89 times less risky than MusclePharm. It trades about 0.05 of its potential returns per unit of risk. MusclePharm is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.11  in MusclePharm on October 10, 2024 and sell it today you would lose (0.11) from holding MusclePharm or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.04%
Values	Daily Returns

National CineMedia  vs.  MusclePharm

National CineMedia

Risk-Adjusted Performance

0 of 100

Insignificant

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.

MusclePharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MusclePharm has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MusclePharm is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with National CineMedia and MusclePharm

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

The idea behind National CineMedia and MusclePharm 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.