Correlation Between Premium Income and Cineplex

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

By analyzing existing cross correlation between Premium Income and Cineplex, you can compare the effects of market volatilities on Premium Income and Cineplex 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 Premium Income with a short position of Cineplex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Income and Cineplex.

Diversification Opportunities for Premium Income and Cineplex

-0.39

Correlation Coefficient

Premium Income  Cineplex

Very good diversification

The 3 months correlation between Premium and Cineplex is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex and Premium Income 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 Premium Income are associated (or correlated) with Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Premium Income i.e., Premium Income and Cineplex go up and down completely randomly.

Pair Corralation between Premium Income and Cineplex

Assuming the 90 days trading horizon Premium Income is expected to under-perform the Cineplex. But the stock apears to be less risky and, when comparing its historical volatility, Premium Income is 1.25 times less risky than Cineplex. The stock trades about -0.04 of its potential returns per unit of risk. The Cineplex is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,060  in Cineplex on September 26, 2024 and sell it today you would earn a total of  185.00  from holding Cineplex or generate 17.45% return on investment over 90 days.

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

Premium Income  vs.  Cineplex

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premium Income is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Cineplex

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premium Income and Cineplex

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

The idea behind Premium Income and Cineplex 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.