Correlation Between Disney and DGTL Holdings

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

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

Diversification Opportunities for Disney and DGTL Holdings

-0.39

Correlation Coefficient

Disney  DGTL Holdings

Very good diversification

The 3 months correlation between Disney and DGTL is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and DGTL Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTL Holdings 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 DGTL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTL Holdings has no effect on the direction of Disney i.e., Disney and DGTL Holdings go up and down completely randomly.

Pair Corralation between Disney and DGTL Holdings

Considering the 90-day investment horizon Disney is expected to generate 7.28 times less return on investment than DGTL Holdings. But when comparing it to its historical volatility, Walt Disney is 30.91 times less risky than DGTL Holdings. It trades about 0.28 of its potential returns per unit of risk. DGTL Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5.19  in DGTL Holdings on September 12, 2024 and sell it today you would lose (4.59) from holding DGTL Holdings or give up 88.44% of portfolio value over 90 days.

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

Walt Disney  vs.  DGTL Holdings

Walt Disney

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

DGTL Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DGTL Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, DGTL Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and DGTL Holdings

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

The idea behind Walt Disney and DGTL Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.