Correlation Between Reservoir Media and National CineMedia

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

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

Diversification Opportunities for Reservoir Media and National CineMedia

0.53

Correlation Coefficient

Reservoir Media  National CineMedia

Very weak diversification

The 3 months correlation between Reservoir and National is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Reservoir Media 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 Reservoir Media 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 Reservoir Media i.e., Reservoir Media and National CineMedia go up and down completely randomly.

Pair Corralation between Reservoir Media and National CineMedia

Given the investment horizon of 90 days Reservoir Media is expected to under-perform the National CineMedia. But the stock apears to be less risky and, when comparing its historical volatility, Reservoir Media is 1.17 times less risky than National CineMedia. The stock trades about -0.17 of its potential returns per unit of risk. The National CineMedia is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  677.00  in National CineMedia on December 5, 2024 and sell it today you would lose (38.00) from holding National CineMedia or give up 5.61% of portfolio value over 90 days.

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

Reservoir Media  vs.  National CineMedia

Reservoir Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 conflicting 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.

Pair Trading with Reservoir Media and National CineMedia

The main advantage of trading using opposite Reservoir Media and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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 Reservoir Media 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.