Correlation Between National CineMedia and Ralph Lauren

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

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

Diversification Opportunities for National CineMedia and Ralph Lauren

0.25

Correlation Coefficient

National CineMedia  Ralph Lauren

Modest diversification

The 3 months correlation between National and Ralph is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Ralph Lauren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren Corp 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 Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren Corp has no effect on the direction of National CineMedia i.e., National CineMedia and Ralph Lauren go up and down completely randomly.

Pair Corralation between National CineMedia and Ralph Lauren

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Ralph Lauren. In addition to that, National CineMedia is 1.19 times more volatile than Ralph Lauren Corp. It trades about -0.16 of its total potential returns per unit of risk. Ralph Lauren Corp is currently generating about 0.15 per unit of volatility. If you would invest  22,000  in Ralph Lauren Corp on September 25, 2024 and sell it today you would earn a total of  1,015  from holding Ralph Lauren Corp or generate 4.61% 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.  Ralph Lauren Corp

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Ralph Lauren Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Ralph Lauren

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

The idea behind National CineMedia and Ralph Lauren Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.