Correlation Between National Cinemedia and Coca Cola

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Can any of the company-specific risk be diversified away by investing in both National Cinemedia and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Cinemedia and Coca-Cola, you can compare the effects of market volatilities on National Cinemedia and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Cinemedia and Coca Cola.

Diversification Opportunities for National Cinemedia and Coca Cola

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between National and Coca Cola is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding National Cinemedia and Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca-Cola has no effect on the direction of National Cinemedia i.e., National Cinemedia and Coca Cola go up and down completely randomly.

Pair Corralation between National Cinemedia and Coca Cola

Given the investment horizon of 90 days National Cinemedia is expected to under-perform the Coca Cola. In addition to that, National Cinemedia is 4.44 times more volatile than Coca-Cola. It trades about -0.02 of its total potential returns per unit of risk. Coca-Cola is currently generating about 0.04 per unit of volatility. If you would invest  4,767  in Coca-Cola on June 29, 2022 and sell it today you would earn a total of  934.00  from holding Coca-Cola or generate 19.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

National Cinemedia  vs.  Coca-Cola

 Performance (%) 
       Timeline  
National Cinemedia 
National Performance
0 of 100
Over the last 90 days National Cinemedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, National Cinemedia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

National Price Channel

Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Coca Cola Price Channel

National Cinemedia and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Cinemedia and Coca Cola

The main advantage of trading using opposite National Cinemedia and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Cinemedia position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.
National Cinemedia vs. Clearwater Paper Corp
The idea behind National Cinemedia and Coca-Cola 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.
Coca Cola vs. Kibush Capital Corp
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 CEO Directory module to screen CEOs from public companies around the world.

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