Correlation Between Under Armour and National CineMedia

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

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

Diversification Opportunities for Under Armour and National CineMedia

0.08

Correlation Coefficient

Under Armour  National CineMedia

Significant diversification

The 3 months correlation between Under and National is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and National CineMedia go up and down completely randomly.

Pair Corralation between Under Armour and National CineMedia

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the National CineMedia. In addition to that, Under Armour is 1.66 times more volatile than National CineMedia. It trades about -0.07 of its total potential returns per unit of risk. National CineMedia is currently generating about 0.02 per unit of volatility. If you would invest  669.00  in National CineMedia on September 21, 2024 and sell it today you would earn a total of  3.00  from holding National CineMedia or generate 0.45% return on investment over 90 days.

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

Under Armour C  vs.  National CineMedia

Under Armour C

Risk-Adjusted Performance

3 of 100

Weak

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

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

Pair Trading with Under Armour and National CineMedia

The main advantage of trading using opposite Under Armour and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour C 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.