Correlation Between National CineMedia and Xunlei

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

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

Diversification Opportunities for National CineMedia and Xunlei

-0.61

Correlation Coefficient

National CineMedia  Xunlei

Excellent diversification

The 3 months correlation between National and Xunlei is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of National CineMedia i.e., National CineMedia and Xunlei go up and down completely randomly.

Pair Corralation between National CineMedia and Xunlei

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Xunlei. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 1.9 times less risky than Xunlei. The stock trades about -0.05 of its potential returns per unit of risk. The Xunlei Ltd Adr is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Xunlei Ltd Adr on December 30, 2024 and sell it today you would earn a total of  232.00  from holding Xunlei Ltd Adr or generate 108.92% return on investment over 90 days.

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

National CineMedia  vs.  Xunlei Ltd Adr

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.

Xunlei Ltd Adr

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Xunlei

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

The idea behind National CineMedia and Xunlei Ltd Adr 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..