Correlation Between National CineMedia and Stepstone

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

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

Diversification Opportunities for National CineMedia and Stepstone

0.84

Correlation Coefficient

National CineMedia  Stepstone

Very poor diversification

The 3 months correlation between National and Stepstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of National CineMedia i.e., National CineMedia and Stepstone go up and down completely randomly.

Pair Corralation between National CineMedia and Stepstone

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Stepstone. In addition to that, National CineMedia is 1.22 times more volatile than Stepstone Group. It trades about -0.05 of its total potential returns per unit of risk. Stepstone Group is currently generating about -0.05 per unit of volatility. If you would invest  5,833  in Stepstone Group on December 30, 2024 and sell it today you would lose (653.00) from holding Stepstone Group or give up 11.19% of portfolio value over 90 days.

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

National CineMedia  vs.  Stepstone 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.

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with National CineMedia and Stepstone

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

The idea behind National CineMedia and Stepstone 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.