Correlation Between Disney and NightFood Holdings
Can any of the company-specific risk be diversified away by investing in both Disney and NightFood Holdings 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 NightFood Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and NightFood Holdings, you can compare the effects of market volatilities on Disney and NightFood Holdings 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 NightFood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and NightFood Holdings.
Diversification Opportunities for Disney and NightFood Holdings
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and NightFood is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings 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 NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Disney i.e., Disney and NightFood Holdings go up and down completely randomly.
Pair Corralation between Disney and NightFood Holdings
Considering the 90-day investment horizon Walt Disney is expected to generate 0.31 times more return on investment than NightFood Holdings. However, Walt Disney is 3.26 times less risky than NightFood Holdings. It trades about 0.53 of its potential returns per unit of risk. NightFood Holdings is currently generating about -0.07 per unit of risk. If you would invest 9,581 in Walt Disney on September 2, 2024 and sell it today you would earn a total of 2,166 from holding Walt Disney or generate 22.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. NightFood Holdings
Performance |
| Timeline |
| Walt Disney |
| NightFood Holdings |
Disney and NightFood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and NightFood Holdings
The main advantage of trading using opposite Disney and NightFood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, NightFood Holdings 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 NightFood Holdings will offset losses from the drop in NightFood Holdings' long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications Corp |
| NightFood Holdings vs. The A2 Milk | NightFood Holdings vs. Artisan Consumer Goods | NightFood Holdings vs. General Mills |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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