Correlation Between National CineMedia and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both National CineMedia and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National CineMedia and Diageo PLC ADR, you can compare the effects of market volatilities on National CineMedia and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of National CineMedia and Diageo PLC.
Diversification Opportunities for National CineMedia and Diageo PLC
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Diageo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of National CineMedia i.e., National CineMedia and Diageo PLC go up and down completely randomly.
Pair Corralation between National CineMedia and Diageo PLC
Given the investment horizon of 90 days National CineMedia is expected to generate 1.55 times more return on investment than Diageo PLC. However, National CineMedia is 1.55 times more volatile than Diageo PLC ADR. It trades about 0.03 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.08 per unit of risk. If you would invest 674.00 in National CineMedia on September 2, 2024 and sell it today you would earn a total of 21.00 from holding National CineMedia or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National CineMedia vs. Diageo PLC ADR
Performance |
| Timeline |
| National CineMedia |
| Diageo PLC ADR |
National CineMedia and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National CineMedia and Diageo PLC
The main advantage of trading using opposite National CineMedia and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| National CineMedia vs. MGO Global Common | National CineMedia vs. Baosheng Media Group | National CineMedia vs. Glory Star New | National CineMedia vs. Impact Fusion International |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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