Correlation Between Sea and National CineMedia

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

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

Diversification Opportunities for Sea and National CineMedia

0.31

Correlation Coefficient

Sea  National CineMedia

Weak diversification

The 3 months correlation between Sea and National is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sea and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Sea 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 Sea 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 Sea i.e., Sea and National CineMedia go up and down completely randomly.

Pair Corralation between Sea and National CineMedia

Allowing for the 90-day total investment horizon Sea is expected to under-perform the National CineMedia. But the stock apears to be less risky and, when comparing its historical volatility, Sea is 1.11 times less risky than National CineMedia. The stock trades about -0.27 of its potential returns per unit of risk. The National CineMedia is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  711.00  in National CineMedia on October 6, 2024 and sell it today you would lose (38.00) from holding National CineMedia or give up 5.34% of portfolio value over 90 days.

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

Sea  vs.  National CineMedia

Sea

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

National CineMedia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sea and National CineMedia

The main advantage of trading using opposite Sea and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.