Correlation Between Disney and Wallbridge Mining

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

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

Diversification Opportunities for Disney and Wallbridge Mining

-0.55

Correlation Coefficient

Disney  Wallbridge Mining

Excellent diversification

The 3 months correlation between Disney and Wallbridge is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Wallbridge Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wallbridge Mining 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 Wallbridge Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wallbridge Mining has no effect on the direction of Disney i.e., Disney and Wallbridge Mining go up and down completely randomly.

Pair Corralation between Disney and Wallbridge Mining

Considering the 90-day investment horizon Walt Disney is expected to generate 0.19 times more return on investment than Wallbridge Mining. However, Walt Disney is 5.23 times less risky than Wallbridge Mining. It trades about 0.31 of its potential returns per unit of risk. Wallbridge Mining is currently generating about -0.05 per unit of risk. If you would invest  8,913  in Walt Disney on August 31, 2024 and sell it today you would earn a total of  2,834  from holding Walt Disney or generate 31.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Walt Disney  vs.  Wallbridge Mining

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.

Wallbridge Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallbridge Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Disney and Wallbridge Mining

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

The idea behind Walt Disney and Wallbridge Mining 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..