Correlation Between National CineMedia and Deluxe

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

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

Diversification Opportunities for National CineMedia and Deluxe

-0.29

Correlation Coefficient

National CineMedia  Deluxe

Very good diversification

The 3 months correlation between National and Deluxe is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe and National CineMedia 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 National CineMedia are associated (or correlated) with Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of National CineMedia i.e., National CineMedia and Deluxe go up and down completely randomly.

Pair Corralation between National CineMedia and Deluxe

Given the investment horizon of 90 days National CineMedia is expected to generate 4.08 times less return on investment than Deluxe. But when comparing it to its historical volatility, National CineMedia is 1.03 times less risky than Deluxe. It trades about 0.03 of its potential returns per unit of risk. Deluxe is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,947  in Deluxe on September 3, 2024 and sell it today you would earn a total of  370.00  from holding Deluxe or generate 19.0% return on investment over 90 days.

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

National CineMedia  vs.  Deluxe

National CineMedia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 2 (%) 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.

Deluxe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National CineMedia and Deluxe

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

The idea behind National CineMedia and Deluxe 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.