Correlation Between Disney and American Picture

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

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

Diversification Opportunities for Disney and American Picture

-0.45

Correlation Coefficient

Disney  American Picture

Very good diversification

The 3 months correlation between Disney and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and American Picture House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Picture House 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 American Picture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Picture House has no effect on the direction of Disney i.e., Disney and American Picture go up and down completely randomly.

Pair Corralation between Disney and American Picture

Considering the 90-day investment horizon Walt Disney is expected to under-perform the American Picture. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 11.26 times less risky than American Picture. The stock trades about -0.23 of its potential returns per unit of risk. The American Picture House is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  22.00  in American Picture House on October 25, 2024 and sell it today you would earn a total of  10.00  from holding American Picture House or generate 45.45% return on investment over 90 days.

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

Walt Disney  vs.  American Picture House

Walt Disney

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 13 (%) 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.

American Picture House

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Picture House are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, American Picture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and American Picture

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

The idea behind Walt Disney and American Picture House 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.