Correlation Between Disney and City Developments
Can any of the company-specific risk be diversified away by investing in both Disney and City Developments 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 City Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and City Developments Limited, you can compare the effects of market volatilities on Disney and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and City Developments.
Diversification Opportunities for Disney and City Developments
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Disney and City is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and City Developments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Disney i.e., Disney and City Developments go up and down completely randomly.
Pair Corralation between Disney and City Developments
Considering the 90-day investment horizon Walt Disney is expected to generate 0.76 times more return on investment than City Developments. However, Walt Disney is 1.32 times less risky than City Developments. It trades about 0.05 of its potential returns per unit of risk. City Developments Limited is currently generating about -0.11 per unit of risk. If you would invest 9,241 in Walt Disney on September 4, 2024 and sell it today you would earn a total of 2,475 from holding Walt Disney or generate 26.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 32.17% |
| Values | Daily Returns |
Walt Disney vs. City Developments Limited
Performance |
| Timeline |
| Walt Disney |
| City Developments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Disney and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and City Developments
The main advantage of trading using opposite Disney and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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