Correlation Between National CineMedia and Dave Busters

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

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

Diversification Opportunities for National CineMedia and Dave Busters

0.12

Correlation Coefficient

National CineMedia  Dave Busters

Average diversification

The 3 months correlation between National and Dave is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta 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 Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of National CineMedia i.e., National CineMedia and Dave Busters go up and down completely randomly.

Pair Corralation between National CineMedia and Dave Busters

Given the investment horizon of 90 days National CineMedia is expected to generate 6.27 times less return on investment than Dave Busters. But when comparing it to its historical volatility, National CineMedia is 1.55 times less risky than Dave Busters. It trades about 0.03 of its potential returns per unit of risk. Dave Busters Entertainment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,045  in Dave Busters Entertainment on September 1, 2024 and sell it today you would earn a total of  887.00  from holding Dave Busters Entertainment or generate 29.13% return on investment over 90 days.

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

National CineMedia  vs.  Dave Busters Entertainment

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Dave Busters Enterta

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with National CineMedia and Dave Busters

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

The idea behind National CineMedia and Dave Busters Entertainment 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.