Correlation Between Interpublic Group and National CineMedia

Can any of the company-specific risk be diversified away by investing in both Interpublic Group 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 Interpublic Group and National CineMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Interpublic Group of and National CineMedia, you can compare the effects of market volatilities on Interpublic Group 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 Interpublic Group with a short position of National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interpublic Group and National CineMedia.

Diversification Opportunities for Interpublic Group and National CineMedia

0.04

Correlation Coefficient

Interpublic Group  National CineMedia

Significant diversification

The 3 months correlation between Interpublic and National is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Interpublic Group of and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Interpublic Group 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 Interpublic Group of 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 Interpublic Group i.e., Interpublic Group and National CineMedia go up and down completely randomly.

Pair Corralation between Interpublic Group and National CineMedia

Considering the 90-day investment horizon Interpublic Group is expected to generate 8.01 times less return on investment than National CineMedia. But when comparing it to its historical volatility, Interpublic Group of is 2.39 times less risky than National CineMedia. It trades about 0.08 of its potential returns per unit of risk. National CineMedia is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  483.00  in National CineMedia on March 5, 2024 and sell it today you would earn a total of  72.00  from holding National CineMedia or generate 14.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Interpublic Group of  vs.  National CineMedia

Interpublic Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interpublic Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Interpublic Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

National CineMedia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 11 (%) 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.

Pair Trading with Interpublic Group and National CineMedia

The main advantage of trading using opposite Interpublic Group and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interpublic Group 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 Interpublic Group of 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.