Correlation Between Disney and Adriatic Metals

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

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

Diversification Opportunities for Disney and Adriatic Metals

-0.5

Correlation Coefficient

Disney  Adriatic Metals

Very good diversification

The 3 months correlation between Disney and Adriatic is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Adriatic Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals PLC 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals PLC has no effect on the direction of Disney i.e., Disney and Adriatic Metals go up and down completely randomly.

Pair Corralation between Disney and Adriatic Metals

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Adriatic Metals. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.89 times less risky than Adriatic Metals. The stock trades about -0.13 of its potential returns per unit of risk. The Adriatic Metals PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  235.00  in Adriatic Metals PLC on December 29, 2024 and sell it today you would earn a total of  48.00  from holding Adriatic Metals PLC or generate 20.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Walt Disney  vs.  Adriatic Metals PLC

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Adriatic Metals PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Adriatic Metals

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

The idea behind Walt Disney and Adriatic Metals PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.