Correlation Between Disney and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both Disney and Franklin Liberty 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 Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Franklin Liberty Low, you can compare the effects of market volatilities on Disney and Franklin Liberty 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 Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Franklin Liberty.
Diversification Opportunities for Disney and Franklin Liberty
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Disney and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Franklin Liberty Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Low 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 Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Low has no effect on the direction of Disney i.e., Disney and Franklin Liberty go up and down completely randomly.
Pair Corralation between Disney and Franklin Liberty
Considering the 90-day investment horizon Walt Disney is expected to generate 3.0 times more return on investment than Franklin Liberty. However, Disney is 3.0 times more volatile than Franklin Liberty Low. It trades about 0.07 of its potential returns per unit of risk. Franklin Liberty Low is currently generating about 0.11 per unit of risk. If you would invest 9,113 in Walt Disney on September 3, 2024 and sell it today you would earn a total of 2,634 from holding Walt Disney or generate 28.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 62.28% |
| Values | Daily Returns |
Walt Disney vs. Franklin Liberty Low
Performance |
| Timeline |
| Walt Disney |
| Franklin Liberty Low |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Disney and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Franklin Liberty
The main advantage of trading using opposite Disney and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Franklin Liberty 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 Franklin Liberty will offset losses from the drop in Franklin Liberty's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| Franklin Liberty vs. Franklin Liberty Short | Franklin Liberty vs. Franklin LibertyQ Equity | Franklin Liberty vs. iShares Currency Hedged | Franklin Liberty vs. Franklin LibertyQ Mid |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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