Correlation Between Disney and 538034AN9

Can any of the company-specific risk be diversified away by investing in both Disney and 538034AN9 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 538034AN9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and Live Nation Entertainment, you can compare the effects of market volatilities on Disney and 538034AN9 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 538034AN9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and 538034AN9.

Diversification Opportunities for Disney and 538034AN9

-0.47

Correlation Coefficient

Disney  538034AN9

Very good diversification

The 3 months correlation between Disney and 538034AN9 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment 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 538034AN9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of Disney i.e., Disney and 538034AN9 go up and down completely randomly.

Pair Corralation between Disney and 538034AN9

Considering the 90-day investment horizon Walt Disney is expected to generate 2.72 times more return on investment than 538034AN9. However, Disney is 2.72 times more volatile than Live Nation Entertainment. It trades about 0.07 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about 0.0 per unit of risk. If you would invest  9,178  in Walt Disney on September 4, 2024 and sell it today you would earn a total of  2,467  from holding Walt Disney or generate 26.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.42%
Values	Daily Returns

Walt Disney  vs.  Live Nation Entertainment

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

Live Nation Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 538034AN9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and 538034AN9

The main advantage of trading using opposite Disney and 538034AN9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, 538034AN9 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 538034AN9 will offset losses from the drop in 538034AN9's long position.

The idea behind Walt Disney and Live Nation Entertainment 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.