Correlation Between Disney and FNCB Bancorp

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

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

Diversification Opportunities for Disney and FNCB Bancorp

0.61

Correlation Coefficient

Disney  FNCB Bancorp

Poor diversification

The 3 months correlation between Disney and FNCB is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and FNCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNCB Bancorp 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 FNCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNCB Bancorp has no effect on the direction of Disney i.e., Disney and FNCB Bancorp go up and down completely randomly.

Pair Corralation between Disney and FNCB Bancorp

If you would invest  8,925  in Walt Disney on September 4, 2024 and sell it today you would earn a total of  2,791  from holding Walt Disney or generate 31.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Walt Disney  vs.  FNCB Bancorp

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.

FNCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, FNCB Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and FNCB Bancorp

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

The idea behind Walt Disney and FNCB Bancorp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.