Correlation Between Pool and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Pool 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 Pool and National CineMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and National CineMedia, you can compare the effects of market volatilities on Pool 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 Pool with a short position of National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and National CineMedia.
Diversification Opportunities for Pool and National CineMedia
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Pool and National is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Pool 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 Pool Corporation 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 Pool i.e., Pool and National CineMedia go up and down completely randomly.
Pair Corralation between Pool and National CineMedia
Given the investment horizon of 90 days Pool Corporation is expected to generate 0.68 times more return on investment than National CineMedia. However, Pool Corporation is 1.47 times less risky than National CineMedia. It trades about 0.11 of its potential returns per unit of risk. National CineMedia is currently generating about -0.04 per unit of risk. If you would invest 36,042 in Pool Corporation on September 1, 2024 and sell it today you would earn a total of 1,667 from holding Pool Corporation or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. National CineMedia
Performance |
| Timeline |
| Pool |
| National CineMedia |
Pool and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and National CineMedia
The main advantage of trading using opposite Pool and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool 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 Pool Corporation 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.| National CineMedia vs. Mirriad Advertising plc | National CineMedia vs. INEO Tech Corp | National CineMedia vs. Kidoz Inc | National CineMedia vs. Marchex |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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