Correlation Between Disney and Industrias

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

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

Diversification Opportunities for Disney and Industrias

-0.53

Correlation Coefficient

Disney  Industrias

Excellent diversification

The 3 months correlation between Disney and Industrias is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and Industrias CH S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias CH S 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 The Walt Disney are associated (or correlated) with Industrias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias CH S has no effect on the direction of Disney i.e., Disney and Industrias go up and down completely randomly.

Pair Corralation between Disney and Industrias

Assuming the 90 days trading horizon The Walt Disney is expected to under-perform the Industrias. But the stock apears to be less risky and, when comparing its historical volatility, The Walt Disney is 1.27 times less risky than Industrias. The stock trades about -0.41 of its potential returns per unit of risk. The Industrias CH S is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  18,399  in Industrias CH S on September 28, 2024 and sell it today you would lose (399.00) from holding Industrias CH S or give up 2.17% of portfolio value over 90 days.

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

The Walt Disney  vs.  Industrias CH S

Walt Disney

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.

Industrias CH S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrias CH S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Industrias is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and Industrias

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

The idea behind The Walt Disney and Industrias CH S 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.