Correlation Between Disney and Caravelle International

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

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

Diversification Opportunities for Disney and Caravelle International

-0.22

Correlation Coefficient

Disney  Caravelle International

Very good diversification

The 3 months correlation between Disney and Caravelle is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International 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 Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Disney i.e., Disney and Caravelle International go up and down completely randomly.

Pair Corralation between Disney and Caravelle International

Considering the 90-day investment horizon Disney is expected to generate 11.28 times less return on investment than Caravelle International. But when comparing it to its historical volatility, Walt Disney is 8.16 times less risky than Caravelle International. It trades about 0.24 of its potential returns per unit of risk. Caravelle International Group is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Caravelle International Group on September 14, 2024 and sell it today you would earn a total of  13.00  from holding Caravelle International Group or generate 41.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.19%
Values	Daily Returns

Walt Disney  vs.  Caravelle International Group

Walt Disney

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caravelle International

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Caravelle International Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady fundamental indicators, Caravelle International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Caravelle International

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

The idea behind Walt Disney and Caravelle International Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.