Correlation Between Disney and Ameriwest Lithium

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

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

Diversification Opportunities for Disney and Ameriwest Lithium

-0.82

Correlation Coefficient

Disney  Ameriwest Lithium

Pay attention - limited upside

The 3 months correlation between Disney and Ameriwest is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Ameriwest Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriwest Lithium 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 Ameriwest Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriwest Lithium has no effect on the direction of Disney i.e., Disney and Ameriwest Lithium go up and down completely randomly.

Pair Corralation between Disney and Ameriwest Lithium

Considering the 90-day investment horizon Walt Disney is expected to generate 0.22 times more return on investment than Ameriwest Lithium. However, Walt Disney is 4.61 times less risky than Ameriwest Lithium. It trades about 0.31 of its potential returns per unit of risk. Ameriwest Lithium is currently generating about -0.03 per unit of risk. If you would invest  8,913  in Walt Disney on September 3, 2024 and sell it today you would earn a total of  2,803  from holding Walt Disney or generate 31.45% return on investment over 90 days.

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

Walt Disney  vs.  Ameriwest Lithium

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 uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ameriwest Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameriwest Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Disney and Ameriwest Lithium

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

The idea behind Walt Disney and Ameriwest Lithium 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.