Correlation Between Disney and GEORGIA

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

By analyzing existing cross correlation between Walt Disney and GEORGIA PWR 475, you can compare the effects of market volatilities on Disney and GEORGIA 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 GEORGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and GEORGIA.

Diversification Opportunities for Disney and GEORGIA

-0.4

Correlation Coefficient

Disney  GEORGIA

Very good diversification

The 3 months correlation between Disney and GEORGIA is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and GEORGIA PWR 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEORGIA PWR 475 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 GEORGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEORGIA PWR 475 has no effect on the direction of Disney i.e., Disney and GEORGIA go up and down completely randomly.

Pair Corralation between Disney and GEORGIA

Considering the 90-day investment horizon Walt Disney is expected to generate 1.07 times more return on investment than GEORGIA. However, Disney is 1.07 times more volatile than GEORGIA PWR 475. It trades about 0.25 of its potential returns per unit of risk. GEORGIA PWR 475 is currently generating about -0.09 per unit of risk. If you would invest  9,185  in Walt Disney on September 14, 2024 and sell it today you would earn a total of  2,305  from holding Walt Disney or generate 25.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	61.9%
Values	Daily Returns

Walt Disney  vs.  GEORGIA PWR 475

Walt Disney

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

GEORGIA PWR 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEORGIA PWR 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GEORGIA PWR 475 investors.

Pair Trading with Disney and GEORGIA

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

The idea behind Walt Disney and GEORGIA PWR 475 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.