Correlation Between Disney and Plum Acquisition
Can any of the company-specific risk be diversified away by investing in both Disney and Plum Acquisition 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 Plum Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Plum Acquisition I, you can compare the effects of market volatilities on Disney and Plum Acquisition 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 Plum Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Plum Acquisition.
Diversification Opportunities for Disney and Plum Acquisition
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and Plum is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Plum Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition I 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition I has no effect on the direction of Disney i.e., Disney and Plum Acquisition go up and down completely randomly.
Pair Corralation between Disney and Plum Acquisition
Considering the 90-day investment horizon Walt Disney is expected to generate 0.71 times more return on investment than Plum Acquisition. However, Walt Disney is 1.4 times less risky than Plum Acquisition. It trades about 0.04 of its potential returns per unit of risk. Plum Acquisition I is currently generating about 0.01 per unit of risk. If you would invest 9,265 in Walt Disney on August 30, 2024 and sell it today you would earn a total of 2,495 from holding Walt Disney or generate 26.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 89.52% |
| Values | Daily Returns |
Walt Disney vs. Plum Acquisition I
Performance |
| Timeline |
| Walt Disney |
| Plum Acquisition I |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Disney and Plum Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Plum Acquisition
The main advantage of trading using opposite Disney and Plum Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Plum Acquisition 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 Plum Acquisition will offset losses from the drop in Plum Acquisition's long position.| Disney vs. Liberty Media | Disney vs. Atlanta Braves Holdings, | Disney vs. News Corp B | Disney vs. News Corp A |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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