Correlation Between Disney and PT Indosat

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

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

Diversification Opportunities for Disney and PT Indosat

-0.39

Correlation Coefficient

Disney  PT Indosat

Very good diversification

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

Pair Corralation between Disney and PT Indosat

Considering the 90-day investment horizon Walt Disney is expected to generate 0.05 times more return on investment than PT Indosat. However, Walt Disney is 18.36 times less risky than PT Indosat. It trades about -0.06 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about -0.26 per unit of risk. If you would invest  11,354  in Walt Disney on September 17, 2024 and sell it today you would lose (130.00) from holding Walt Disney or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Walt Disney  vs.  PT Indosat Tbk

Walt Disney

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 16 (%) 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.

PT Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Disney and PT Indosat

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

The idea behind Walt Disney and PT Indosat Tbk 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.