Correlation Between Disney and Touchmark Bancshares

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

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

Diversification Opportunities for Disney and Touchmark Bancshares

-0.92

Correlation Coefficient

Disney  Touchmark Bancshares

Pay attention - limited upside

The 3 months correlation between Disney and Touchmark is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Touchmark Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchmark Bancshares 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 Touchmark Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchmark Bancshares has no effect on the direction of Disney i.e., Disney and Touchmark Bancshares go up and down completely randomly.

Pair Corralation between Disney and Touchmark Bancshares

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Touchmark Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.26 times less risky than Touchmark Bancshares. The stock trades about -0.04 of its potential returns per unit of risk. The Touchmark Bancshares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  770.00  in Touchmark Bancshares on September 18, 2024 and sell it today you would earn a total of  37.00  from holding Touchmark Bancshares or generate 4.81% 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.  Touchmark Bancshares

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.

Touchmark Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchmark Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Disney and Touchmark Bancshares

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

The idea behind Walt Disney and Touchmark Bancshares 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.