Correlation Between National CineMedia and Stagwell

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

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

Diversification Opportunities for National CineMedia and Stagwell

-0.08

Correlation Coefficient

National CineMedia  Stagwell

Good diversification

The 3 months correlation between National and Stagwell is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of National CineMedia i.e., National CineMedia and Stagwell go up and down completely randomly.

Pair Corralation between National CineMedia and Stagwell

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Stagwell. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 1.03 times less risky than Stagwell. The stock trades about -0.03 of its potential returns per unit of risk. The Stagwell is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Stagwell on September 25, 2024 and sell it today you would lose (38.00) from holding Stagwell or give up 5.39% of portfolio value over 90 days.

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

National CineMedia  vs.  Stagwell

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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with National CineMedia and Stagwell

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

The idea behind National CineMedia and Stagwell 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 CEOs Directory module to screen CEOs from public companies around the world.