Correlation Between Disney and IQIYI
Can any of the company-specific risk be diversified away by investing in both Disney and IQIYI 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 IQIYI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and iQIYI Inc, you can compare the effects of market volatilities on Disney and IQIYI 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 IQIYI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and IQIYI.
Diversification Opportunities for Disney and IQIYI
Excellent diversification
The 3 months correlation between Disney and IQIYI is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc 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 IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Disney i.e., Disney and IQIYI go up and down completely randomly.
Pair Corralation between Disney and IQIYI
Considering the 90-day investment horizon Disney is expected to generate 92.36 times less return on investment than IQIYI. But when comparing it to its historical volatility, Walt Disney is 5.55 times less risky than IQIYI. It trades about 0.0 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 208.00 in iQIYI Inc on September 18, 2024 and sell it today you would earn a total of 6.50 from holding iQIYI Inc or generate 3.13% 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. iQIYI Inc
Performance |
| Timeline |
| Walt Disney |
| iQIYI Inc |
Disney and IQIYI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and IQIYI
The main advantage of trading using opposite Disney and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, IQIYI 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 IQIYI will offset losses from the drop in IQIYI's long position.| Disney vs. Liberty Media | Disney vs. News Corp B | Disney vs. News Corp A | Disney vs. Madison Square Garden |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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