Correlation Between Disney and REDFLEX HOLDINGS

Can any of the company-specific risk be diversified away by investing in both Disney and REDFLEX 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 REDFLEX 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 REDFLEX HOLDINGS LTD, you can compare the effects of market volatilities on Disney and REDFLEX 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 REDFLEX HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and REDFLEX HOLDINGS.

Diversification Opportunities for Disney and REDFLEX HOLDINGS

-0.45

Correlation Coefficient

Disney  REDFLEX HOLDINGS

Very good diversification

The 3 months correlation between Disney and REDFLEX is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and REDFLEX HOLDINGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDFLEX HOLDINGS LTD 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 REDFLEX HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDFLEX HOLDINGS LTD has no effect on the direction of Disney i.e., Disney and REDFLEX HOLDINGS go up and down completely randomly.

Pair Corralation between Disney and REDFLEX HOLDINGS

Considering the 90-day investment horizon Disney is expected to generate 4.1 times less return on investment than REDFLEX HOLDINGS. But when comparing it to its historical volatility, Walt Disney is 15.67 times less risky than REDFLEX HOLDINGS. It trades about 0.31 of its potential returns per unit of risk. REDFLEX HOLDINGS LTD is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.50  in REDFLEX HOLDINGS LTD on September 2, 2024 and sell it today you would lose (0.71) from holding REDFLEX HOLDINGS LTD or give up 20.29% of portfolio value over 90 days.

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

Walt Disney  vs.  REDFLEX HOLDINGS LTD

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 unfluctuating forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and REDFLEX HOLDINGS

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

The idea behind Walt Disney and REDFLEX HOLDINGS LTD 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.