Correlation Between Disney and Clime Investment

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

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

Diversification Opportunities for Disney and Clime Investment

-0.56

Correlation Coefficient

Disney  Clime Investment

Excellent diversification

The 3 months correlation between Disney and Clime is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Clime Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clime Investment Man 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 Clime Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clime Investment Man has no effect on the direction of Disney i.e., Disney and Clime Investment go up and down completely randomly.

Pair Corralation between Disney and Clime Investment

Considering the 90-day investment horizon Disney is expected to generate 2.34 times less return on investment than Clime Investment. But when comparing it to its historical volatility, Walt Disney is 22.47 times less risky than Clime Investment. It trades about 0.24 of its potential returns per unit of risk. Clime Investment Management is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Clime Investment Management on September 15, 2024 and sell it today you would lose (0.09) from holding Clime Investment Management or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Walt Disney  vs.  Clime Investment Management

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.

Clime Investment Man

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clime Investment Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clime Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Clime Investment

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

The idea behind Walt Disney and Clime Investment Management 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.