Correlation Between National CineMedia and 191216DQ0

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Can any of the company-specific risk be diversified away by investing in both National CineMedia and 191216DQ0 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 191216DQ0 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National CineMedia and COCA COLA CO, you can compare the effects of market volatilities on National CineMedia and 191216DQ0 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 191216DQ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of National CineMedia and 191216DQ0.

Diversification Opportunities for National CineMedia and 191216DQ0

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between National and 191216DQ0 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216DQ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of National CineMedia i.e., National CineMedia and 191216DQ0 go up and down completely randomly.

Pair Corralation between National CineMedia and 191216DQ0

Given the investment horizon of 90 days National CineMedia is expected to generate 10.35 times less return on investment than 191216DQ0. But when comparing it to its historical volatility, National CineMedia is 9.19 times less risky than 191216DQ0. It trades about 0.05 of its potential returns per unit of risk. COCA COLA CO is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,104  in COCA COLA CO on October 26, 2024 and sell it today you would lose (830.00) from holding COCA COLA CO or give up 10.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy86.23%
ValuesDaily Returns

National CineMedia  vs.  COCA COLA CO

 Performance 
       Timeline  
National CineMedia 

Risk-Adjusted Performance

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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 current stock price confusion, may contribute to short-horizon losses for the traders.
COCA A CO 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DQ0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

National CineMedia and 191216DQ0 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National CineMedia and 191216DQ0

The main advantage of trading using opposite National CineMedia and 191216DQ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia position performs unexpectedly, 191216DQ0 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 191216DQ0 will offset losses from the drop in 191216DQ0's long position.
The idea behind National CineMedia and COCA COLA CO 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.

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