Correlation Between National CineMedia and CARDINAL

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

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

Diversification Opportunities for National CineMedia and CARDINAL

-0.3

Correlation Coefficient

National CineMedia  CARDINAL

Very good diversification

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

Pair Corralation between National CineMedia and CARDINAL

Given the investment horizon of 90 days National CineMedia is expected to generate 0.87 times more return on investment than CARDINAL. However, National CineMedia is 1.15 times less risky than CARDINAL. It trades about 0.06 of its potential returns per unit of risk. CARDINAL HEALTH INC is currently generating about -0.04 per unit of risk. If you would invest  685.00  in National CineMedia on September 13, 2024 and sell it today you would earn a total of  53.00  from holding National CineMedia or generate 7.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.75%
Values	Daily Returns

National CineMedia  vs.  CARDINAL HEALTH INC

National CineMedia

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting primary indicators, National CineMedia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CARDINAL HEALTH INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARDINAL HEALTH INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARDINAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National CineMedia and CARDINAL

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

The idea behind National CineMedia and CARDINAL HEALTH INC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.