Correlation Between Disney and ASX

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

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

Diversification Opportunities for Disney and ASX

-0.65

Correlation Coefficient

Disney  ASX

Excellent diversification

The 3 months correlation between Disney and ASX is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited has no effect on the direction of Disney i.e., Disney and ASX go up and down completely randomly.

Pair Corralation between Disney and ASX

Considering the 90-day investment horizon Walt Disney is expected to under-perform the ASX. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 3.08 times less risky than ASX. The stock trades about -0.21 of its potential returns per unit of risk. The ASX Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,086  in ASX Limited on October 9, 2024 and sell it today you would lose (35.00) from holding ASX Limited or give up 0.86% of portfolio value over 90 days.

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

Walt Disney  vs.  ASX Limited

Walt Disney

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 16 (%) 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.

ASX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ASX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Disney and ASX

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

The idea behind Walt Disney and ASX Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.