Correlation Between Verde Clean and National CineMedia

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

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

Diversification Opportunities for Verde Clean and National CineMedia

-0.23

Correlation Coefficient

Verde Clean  National CineMedia

Very good diversification

The 3 months correlation between Verde and National is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Verde Clean 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 Verde Clean Fuels 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 Verde Clean i.e., Verde Clean and National CineMedia go up and down completely randomly.

Pair Corralation between Verde Clean and National CineMedia

Given the investment horizon of 90 days Verde Clean is expected to generate 1.04 times less return on investment than National CineMedia. In addition to that, Verde Clean is 1.76 times more volatile than National CineMedia. It trades about 0.03 of its total potential returns per unit of risk. National CineMedia is currently generating about 0.06 per unit of volatility. If you would invest  439.00  in National CineMedia on September 26, 2024 and sell it today you would earn a total of  221.00  from holding National CineMedia or generate 50.34% return on investment over 90 days.

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

Verde Clean Fuels  vs.  National CineMedia

Verde Clean Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Verde Clean and National CineMedia

The main advantage of trading using opposite Verde Clean and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean 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 Verde Clean Fuels 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.