Correlation Between Disney and City National

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

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

Diversification Opportunities for Disney and City National

0.84

Correlation Coefficient

Disney  City National

Very poor diversification

The 3 months correlation between Disney and City is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale 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 City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of Disney i.e., Disney and City National go up and down completely randomly.

Pair Corralation between Disney and City National

Considering the 90-day investment horizon Walt Disney is expected to generate 11.28 times more return on investment than City National. However, Disney is 11.28 times more volatile than City National Rochdale. It trades about 0.25 of its potential returns per unit of risk. City National Rochdale is currently generating about 0.13 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  City National Rochdale

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.

City National Rochdale

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, City National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and City National

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

The idea behind Walt Disney and City National Rochdale 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.