Correlation Between Disney and Admiral Group

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

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

Diversification Opportunities for Disney and Admiral Group

-0.68

Correlation Coefficient

Disney  Admiral Group

Excellent diversification

The 3 months correlation between Disney and Admiral is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Admiral Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Admiral Group 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 Admiral Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Admiral Group PLC has no effect on the direction of Disney i.e., Disney and Admiral Group go up and down completely randomly.

Pair Corralation between Disney and Admiral Group

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Admiral Group. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.2 times less risky than Admiral Group. The stock trades about -0.11 of its potential returns per unit of risk. The Admiral Group PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,278  in Admiral Group PLC on December 29, 2024 and sell it today you would earn a total of  387.00  from holding Admiral Group PLC or generate 11.81% return on investment over 90 days.

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

Walt Disney  vs.  Admiral Group 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.

Admiral Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Admiral Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Admiral Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Disney and Admiral Group

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

The idea behind Walt Disney and Admiral Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.