Correlation Between National CineMedia and Valeura Energy

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

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

Diversification Opportunities for National CineMedia and Valeura Energy

0.14

Correlation Coefficient

National CineMedia  Valeura Energy

Average diversification

The 3 months correlation between National and Valeura is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of National CineMedia i.e., National CineMedia and Valeura Energy go up and down completely randomly.

Pair Corralation between National CineMedia and Valeura Energy

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Valeura Energy. In addition to that, National CineMedia is 1.09 times more volatile than Valeura Energy. It trades about -0.03 of its total potential returns per unit of risk. Valeura Energy is currently generating about 0.12 per unit of volatility. If you would invest  436.00  in Valeura Energy on December 20, 2024 and sell it today you would earn a total of  94.00  from holding Valeura Energy or generate 21.56% return on investment over 90 days.

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

National CineMedia  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Valeura Energy

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

The idea behind National CineMedia and Valeura Energy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.