Correlation Between Disney and European Metals
Can any of the company-specific risk be diversified away by investing in both Disney and European Metals 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 European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and European Metals Holdings, you can compare the effects of market volatilities on Disney and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and European Metals.
Diversification Opportunities for Disney and European Metals
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and European is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Disney i.e., Disney and European Metals go up and down completely randomly.
Pair Corralation between Disney and European Metals
Considering the 90-day investment horizon Walt Disney is expected to generate 0.18 times more return on investment than European Metals. However, Walt Disney is 5.56 times less risky than European Metals. It trades about 0.51 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.03 per unit of risk. If you would invest 9,620 in Walt Disney on September 1, 2024 and sell it today you would earn a total of 2,127 from holding Walt Disney or generate 22.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. European Metals Holdings
Performance |
| Timeline |
| Walt Disney |
| European Metals Holdings |
Disney and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and European Metals
The main advantage of trading using opposite Disney and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications Corp |
| European Metals vs. ATT Inc | European Metals vs. Merck Company | European Metals vs. Walt Disney | European Metals vs. Caterpillar |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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