Correlation Between Disney and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Disney and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Northern Lights, you can compare the effects of market volatilities on Disney and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Northern Lights.
Diversification Opportunities for Disney and Northern Lights
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Disney and Northern is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Disney i.e., Disney and Northern Lights go up and down completely randomly.
Pair Corralation between Disney and Northern Lights
Considering the 90-day investment horizon Disney is expected to generate 1.94 times less return on investment than Northern Lights. In addition to that, Disney is 1.78 times more volatile than Northern Lights. It trades about 0.02 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of volatility. If you would invest 2,171 in Northern Lights on October 7, 2024 and sell it today you would earn a total of 872.00 from holding Northern Lights or generate 40.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Northern Lights
Performance |
| Timeline |
| Walt Disney |
| Northern Lights |
Disney and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Northern Lights
The main advantage of trading using opposite Disney and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| Northern Lights vs. SmartETFs Dividend Builder | Northern Lights vs. Grizzle Growth ETF | Northern Lights vs. FMQQ The Next |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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