Correlation Between UNITED and National CineMedia

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

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

Diversification Opportunities for UNITED and National CineMedia

0.34

Correlation Coefficient

UNITED  National CineMedia

Weak diversification

The 3 months correlation between UNITED and National is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding UNITED TECHNOLOGIES P and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and UNITED 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 UNITED TECHNOLOGIES P 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 UNITED i.e., UNITED and National CineMedia go up and down completely randomly.

Pair Corralation between UNITED and National CineMedia

Assuming the 90 days trading horizon UNITED TECHNOLOGIES P is expected to under-perform the National CineMedia. In addition to that, UNITED is 1.61 times more volatile than National CineMedia. It trades about -0.32 of its total potential returns per unit of risk. National CineMedia is currently generating about -0.39 per unit of volatility. If you would invest  734.00  in National CineMedia on October 11, 2024 and sell it today you would lose (111.00) from holding National CineMedia or give up 15.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

UNITED TECHNOLOGIES P  vs.  National CineMedia

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED TECHNOLOGIES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for UNITED TECHNOLOGIES P 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 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 UNITED and National CineMedia

The main advantage of trading using opposite UNITED and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED 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 UNITED TECHNOLOGIES P 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.