Correlation Between Disney and Aberdeen Income

Can any of the company-specific risk be diversified away by investing in both Disney and Aberdeen Income 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 Aberdeen Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and Aberdeen Income Credit, you can compare the effects of market volatilities on Disney and Aberdeen Income 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 Aberdeen Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Aberdeen Income.

Diversification Opportunities for Disney and Aberdeen Income

0.62

Correlation Coefficient

Disney  Aberdeen Income

Poor diversification

The 3 months correlation between Disney and Aberdeen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Aberdeen Income Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Income Credit 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 Aberdeen Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Income Credit has no effect on the direction of Disney i.e., Disney and Aberdeen Income go up and down completely randomly.

Pair Corralation between Disney and Aberdeen Income

Considering the 90-day investment horizon Walt Disney is expected to generate 2.45 times more return on investment than Aberdeen Income. However, Disney is 2.45 times more volatile than Aberdeen Income Credit. It trades about 0.31 of its potential returns per unit of risk. Aberdeen Income Credit is currently generating about 0.14 per unit of risk. If you would invest  8,913  in Walt Disney on September 2, 2024 and sell it today you would earn a total of  2,834  from holding Walt Disney or generate 31.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Aberdeen Income Credit

Walt Disney

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aberdeen Income Credit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Income Credit are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable fundamental indicators, Aberdeen Income is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Disney and Aberdeen Income

The main advantage of trading using opposite Disney and Aberdeen Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Aberdeen Income 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 Aberdeen Income will offset losses from the drop in Aberdeen Income's long position.

The idea behind Walt Disney and Aberdeen Income Credit 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.