Correlation Between Disney and Cable One
Can any of the company-specific risk be diversified away by investing in both Disney and Cable One 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 Disney and Cable One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Cable One, you can compare the effects of market volatilities on Disney and Cable One 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 Disney with a short position of Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Cable One.
Diversification Opportunities for Disney and Cable One
Poor diversification
The 3 months correlation between Disney and Cable is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and Disney 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 Walt Disney are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Disney i.e., Disney and Cable One go up and down completely randomly.
Pair Corralation between Disney and Cable One
Considering the 90-day investment horizon Walt Disney is expected to generate 0.59 times more return on investment than Cable One. However, Walt Disney is 1.7 times less risky than Cable One. It trades about 0.06 of its potential returns per unit of risk. Cable One is currently generating about -0.02 per unit of risk. If you would invest 9,196 in Walt Disney on August 26, 2024 and sell it today you would earn a total of 2,369 from holding Walt Disney or generate 25.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Cable One
Performance |
| Timeline |
| Walt Disney |
| Cable One |
Disney and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Cable One
The main advantage of trading using opposite Disney and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| Cable One vs. Liberty Global PLC | Cable One vs. Liberty Global PLC | Cable One vs. Liberty Broadband Srs | Cable One vs. Shenandoah Telecommunications Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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