Correlation Between News Corp and Disney
Can any of the company-specific risk be diversified away by investing in both News Corp and Disney 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 News Corp and Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between News Corp A and Walt Disney, you can compare the effects of market volatilities on News Corp and Disney 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 News Corp with a short position of Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of News Corp and Disney.
Diversification Opportunities for News Corp and Disney
Poor diversification
The 3 months correlation between News and Disney is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding News Corp A and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and News Corp 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 News Corp A are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of News Corp i.e., News Corp and Disney go up and down completely randomly.
Pair Corralation between News Corp and Disney
Given the investment horizon of 90 days News Corp A is expected to generate 0.8 times more return on investment than Disney. However, News Corp A is 1.26 times less risky than Disney. It trades about 0.1 of its potential returns per unit of risk. Walt Disney is currently generating about 0.06 per unit of risk. If you would invest 2,198 in News Corp A on August 27, 2024 and sell it today you would earn a total of 751.00 from holding News Corp A or generate 34.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
News Corp A vs. Walt Disney
Performance |
| Timeline |
| News Corp A |
| Walt Disney |
News Corp and Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with News Corp and Disney
The main advantage of trading using opposite News Corp and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News Corp position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.| News Corp vs. Marcus | News Corp vs. Liberty Media | News Corp vs. Warner Music Group | News Corp vs. Fox Corp Class |
| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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