Correlation Between Lions Gate and AMC Networks

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

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

Diversification Opportunities for Lions Gate and AMC Networks

0.62

Correlation Coefficient

Lions Gate  AMC Networks

Poor diversification

The 3 months correlation between Lions and AMC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lions Gate Entertainment and AMC Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Networks and Lions Gate 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 Lions Gate Entertainment are associated (or correlated) with AMC Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Networks has no effect on the direction of Lions Gate i.e., Lions Gate and AMC Networks go up and down completely randomly.

Pair Corralation between Lions Gate and AMC Networks

Assuming the 90 days horizon Lions Gate is expected to generate 3.05 times less return on investment than AMC Networks. But when comparing it to its historical volatility, Lions Gate Entertainment is 1.35 times less risky than AMC Networks. It trades about 0.04 of its potential returns per unit of risk. AMC Networks is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  785.00  in AMC Networks on September 23, 2024 and sell it today you would earn a total of  152.00  from holding AMC Networks or generate 19.36% return on investment over 90 days.

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

Lions Gate Entertainment  vs.  AMC Networks

Lions Gate Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lions Gate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AMC Networks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMC Networks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, AMC Networks showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lions Gate and AMC Networks

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

The idea behind Lions Gate Entertainment and AMC Networks 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.