Correlation Between Disney and Arizona Lithium

Can any of the company-specific risk be diversified away by investing in both Disney and Arizona 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 Arizona 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 Arizona Lithium Limited, you can compare the effects of market volatilities on Disney and Arizona 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 Arizona Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Arizona Lithium.

Diversification Opportunities for Disney and Arizona Lithium

-0.63

Correlation Coefficient

Disney  Arizona Lithium

Excellent diversification

The 3 months correlation between Disney and Arizona is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Arizona Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona 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 Arizona Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Lithium has no effect on the direction of Disney i.e., Disney and Arizona Lithium go up and down completely randomly.

Pair Corralation between Disney and Arizona Lithium

Considering the 90-day investment horizon Walt Disney is expected to generate 0.11 times more return on investment than Arizona Lithium. However, Walt Disney is 9.3 times less risky than Arizona Lithium. It trades about 0.25 of its potential returns per unit of risk. Arizona Lithium Limited is currently generating about 0.02 per unit of risk. If you would invest  9,185  in Walt Disney on September 14, 2024 and sell it today you would earn a total of  2,305  from holding Walt Disney or generate 25.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Walt Disney  vs.  Arizona Lithium Limited

Walt Disney

Risk-Adjusted Performance

20 of 100

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.

Arizona Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Lithium Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arizona Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Arizona Lithium

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

The idea behind Walt Disney and Arizona Lithium Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.