Correlation Between Disney and Global Energy
Can any of the company-specific risk be diversified away by investing in both Disney and Global Energy 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 Global Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Global Energy Metals, you can compare the effects of market volatilities on Disney and Global Energy 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 Global Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Global Energy.
Diversification Opportunities for Disney and Global Energy
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and Global is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Global Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Energy Metals 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 Global Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Energy Metals has no effect on the direction of Disney i.e., Disney and Global Energy go up and down completely randomly.
Pair Corralation between Disney and Global Energy
Considering the 90-day investment horizon Walt Disney is expected to generate 0.15 times more return on investment than Global Energy. However, Walt Disney is 6.78 times less risky than Global Energy. It trades about 0.51 of its potential returns per unit of risk. Global Energy Metals is currently generating about 0.04 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 | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walt Disney vs. Global Energy Metals
Performance |
| Timeline |
| Walt Disney |
| Global Energy Metals |
Disney and Global Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Global Energy
The main advantage of trading using opposite Disney and Global Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Global Energy 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 Global Energy will offset losses from the drop in Global Energy's long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications Corp |
| Global Energy vs. ATT Inc | Global Energy vs. Merck Company | Global Energy vs. Walt Disney | Global Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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