Correlation Between Disney and ANTHEM

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Can any of the company-specific risk be diversified away by investing in both Disney and ANTHEM 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 ANTHEM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and ANTHEM INC 455, you can compare the effects of market volatilities on Disney and ANTHEM 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 ANTHEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and ANTHEM.

Diversification Opportunities for Disney and ANTHEM

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Disney and ANTHEM is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ANTHEM INC 455 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANTHEM INC 455 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 ANTHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANTHEM INC 455 has no effect on the direction of Disney i.e., Disney and ANTHEM go up and down completely randomly.

Pair Corralation between Disney and ANTHEM

Considering the 90-day investment horizon Walt Disney is expected to generate 1.18 times more return on investment than ANTHEM. However, Disney is 1.18 times more volatile than ANTHEM INC 455. It trades about 0.44 of its potential returns per unit of risk. ANTHEM INC 455 is currently generating about 0.18 per unit of risk. If you would invest  9,624  in Walt Disney on August 24, 2024 and sell it today you would earn a total of  1,941  from holding Walt Disney or generate 20.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy65.22%
ValuesDaily Returns

Walt Disney  vs.  ANTHEM INC 455

 Performance 
       Timeline  
Walt Disney 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.
ANTHEM INC 455 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ANTHEM INC 455 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ANTHEM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Disney and ANTHEM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and ANTHEM

The main advantage of trading using opposite Disney and ANTHEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, ANTHEM 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 ANTHEM will offset losses from the drop in ANTHEM's long position.
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The idea behind Walt Disney and ANTHEM INC 455 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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