Correlation Between National CineMedia and Madison Square

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

Diversification Opportunities for National CineMedia and Madison Square

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between National and Madison is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of National CineMedia i.e., National CineMedia and Madison Square go up and down completely randomly.

Pair Corralation between National CineMedia and Madison Square

Given the investment horizon of 90 days National CineMedia is expected to generate 1.41 times less return on investment than Madison Square. In addition to that, National CineMedia is 2.52 times more volatile than Madison Square Garden. It trades about 0.02 of its total potential returns per unit of risk. Madison Square Garden is currently generating about 0.06 per unit of volatility. If you would invest  18,250  in Madison Square Garden on February 14, 2024 and sell it today you would earn a total of  239.00  from holding Madison Square Garden or generate 1.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

National CineMedia  vs.  Madison Square Garden

 Performance 
       Timeline  
National CineMedia 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, National CineMedia demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Madison Square Garden 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National CineMedia and Madison Square Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National CineMedia and Madison Square

The main advantage of trading using opposite National CineMedia and Madison Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National CineMedia position performs unexpectedly, Madison Square 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 Madison Square will offset losses from the drop in Madison Square's long position.
The idea behind National CineMedia and Madison Square Garden 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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