Correlation Between Disney and Liberty Latin

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

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

Diversification Opportunities for Disney and Liberty Latin

-0.84

Correlation Coefficient

Disney  Liberty Latin

Pay attention - limited upside

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

Pair Corralation between Disney and Liberty Latin

Considering the 90-day investment horizon Walt Disney is expected to generate 0.4 times more return on investment than Liberty Latin. However, Walt Disney is 2.48 times less risky than Liberty Latin. It trades about 0.29 of its potential returns per unit of risk. Liberty Latin America is currently generating about -0.11 per unit of risk. If you would invest  9,038  in Walt Disney on August 30, 2024 and sell it today you would earn a total of  2,722  from holding Walt Disney or generate 30.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Liberty Latin America

Walt Disney

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 23 (%) 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.

Liberty Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Disney and Liberty Latin

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

The idea behind Walt Disney and Liberty Latin America 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.