Correlation Between Disney and Cult Food
Can any of the company-specific risk be diversified away by investing in both Disney and Cult Food 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 Cult Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Cult Food Science, you can compare the effects of market volatilities on Disney and Cult Food 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 Cult Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Cult Food.
Diversification Opportunities for Disney and Cult Food
Excellent diversification
The 3 months correlation between Disney and Cult is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science 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 Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of Disney i.e., Disney and Cult Food go up and down completely randomly.
Pair Corralation between Disney and Cult Food
Considering the 90-day investment horizon Disney is expected to generate 3.32 times less return on investment than Cult Food. But when comparing it to its historical volatility, Walt Disney is 6.2 times less risky than Cult Food. It trades about 0.07 of its potential returns per unit of risk. Cult Food Science is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5.03 in Cult Food Science on September 2, 2024 and sell it today you would lose (1.49) from holding Cult Food Science or give up 29.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Cult Food Science
Performance |
| Timeline |
| Walt Disney |
| Cult Food Science |
Disney and Cult Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Cult Food
The main advantage of trading using opposite Disney and Cult Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Cult Food 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 Cult Food will offset losses from the drop in Cult Food's long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications 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 the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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