Correlation Between National CineMedia and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both National CineMedia and Sensient Technologies 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 Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National CineMedia and Sensient Technologies, you can compare the effects of market volatilities on National CineMedia and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of National CineMedia and Sensient Technologies.
Diversification Opportunities for National CineMedia and Sensient Technologies
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Sensient is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of National CineMedia i.e., National CineMedia and Sensient Technologies go up and down completely randomly.
Pair Corralation between National CineMedia and Sensient Technologies
Given the investment horizon of 90 days National CineMedia is expected to under-perform the Sensient Technologies. In addition to that, National CineMedia is 1.68 times more volatile than Sensient Technologies. It trades about -0.04 of its total potential returns per unit of risk. Sensient Technologies is currently generating about 0.1 per unit of volatility. If you would invest 7,507 in Sensient Technologies on September 1, 2024 and sell it today you would earn a total of 257.00 from holding Sensient Technologies or generate 3.42% 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. Sensient Technologies
Performance |
| Timeline |
| National CineMedia |
| Sensient Technologies |
National CineMedia and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National CineMedia and Sensient Technologies
The main advantage of trading using opposite National CineMedia and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.| National CineMedia vs. Mirriad Advertising plc | National CineMedia vs. INEO Tech Corp | National CineMedia vs. Kidoz Inc | National CineMedia vs. Marchex |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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