Correlation Between Disney and BBX Capital

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

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

Diversification Opportunities for Disney and BBX Capital

0.27

Correlation Coefficient

Disney  BBX Capital

Modest diversification

The 3 months correlation between Disney and BBX is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and BBX Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBX Capital 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 BBX Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBX Capital has no effect on the direction of Disney i.e., Disney and BBX Capital go up and down completely randomly.

Pair Corralation between Disney and BBX Capital

Considering the 90-day investment horizon Walt Disney is expected to generate 0.81 times more return on investment than BBX Capital. However, Walt Disney is 1.23 times less risky than BBX Capital. It trades about -0.12 of its potential returns per unit of risk. BBX Capital is currently generating about -0.13 per unit of risk. If you would invest  11,155  in Walt Disney on December 27, 2024 and sell it today you would lose (1,111) from holding Walt Disney or give up 9.96% of portfolio value over 90 days.

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

Walt Disney  vs.  BBX Capital

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.

BBX Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBX Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Disney and BBX Capital

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

The idea behind Walt Disney and BBX Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.