Correlation Between Dave Busters and National CineMedia

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

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

Diversification Opportunities for Dave Busters and National CineMedia

-0.13

Correlation Coefficient

Dave Busters  National CineMedia

Good diversification

The 3 months correlation between Dave and National is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Dave Busters i.e., Dave Busters and National CineMedia go up and down completely randomly.

Pair Corralation between Dave Busters and National CineMedia

Given the investment horizon of 90 days Dave Busters is expected to generate 10.02 times less return on investment than National CineMedia. But when comparing it to its historical volatility, Dave Busters Entertainment is 1.18 times less risky than National CineMedia. It trades about 0.01 of its potential returns per unit of risk. National CineMedia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  292.00  in National CineMedia on September 19, 2024 and sell it today you would earn a total of  405.00  from holding National CineMedia or generate 138.7% return on investment over 90 days.

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

Dave Busters Entertainment  vs.  National CineMedia

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Pair Trading with Dave Busters and National CineMedia

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

The idea behind Dave Busters Entertainment and National CineMedia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.