Correlation Between Disney and Western Magnesium
Can any of the company-specific risk be diversified away by investing in both Disney and Western Magnesium 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 Western Magnesium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Western Magnesium, you can compare the effects of market volatilities on Disney and Western Magnesium 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 Western Magnesium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Western Magnesium.
Diversification Opportunities for Disney and Western Magnesium
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Disney and Western is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Western Magnesium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Magnesium 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 Western Magnesium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Magnesium has no effect on the direction of Disney i.e., Disney and Western Magnesium go up and down completely randomly.
Pair Corralation between Disney and Western Magnesium
Considering the 90-day investment horizon Walt Disney is expected to generate 0.23 times more return on investment than Western Magnesium. However, Walt Disney is 4.3 times less risky than Western Magnesium. It trades about 0.07 of its potential returns per unit of risk. Western Magnesium is currently generating about -0.09 per unit of risk. If you would invest 9,239 in Walt Disney on September 3, 2024 and sell it today you would earn a total of 2,477 from holding Walt Disney or generate 26.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Western Magnesium
Performance |
| Timeline |
| Walt Disney |
| Western Magnesium |
Disney and Western Magnesium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Western Magnesium
The main advantage of trading using opposite Disney and Western Magnesium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Western Magnesium 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 Western Magnesium will offset losses from the drop in Western Magnesium's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| Western Magnesium vs. Qubec Nickel Corp | Western Magnesium vs. IGO Limited | Western Magnesium vs. Avarone Metals | Western Magnesium vs. Adriatic Metals PLC |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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