Correlation Between Disney and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Disney and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Sandvik AB, you can compare the effects of market volatilities on Disney and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Sandvik AB.
Diversification Opportunities for Disney and Sandvik AB
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and Sandvik is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Disney i.e., Disney and Sandvik AB go up and down completely randomly.
Pair Corralation between Disney and Sandvik AB
Considering the 90-day investment horizon Walt Disney is expected to generate 1.79 times more return on investment than Sandvik AB. However, Disney is 1.79 times more volatile than Sandvik AB. It trades about 0.51 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.35 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 | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Sandvik AB
Performance |
| Timeline |
| Walt Disney |
| Sandvik AB |
Disney and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Sandvik AB
The main advantage of trading using opposite Disney and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications Corp |
| Sandvik AB vs. GE Aerospace | Sandvik AB vs. Eaton PLC | Sandvik AB vs. Siemens AG Class | Sandvik AB vs. Parker Hannifin |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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