Correlation Between Disney and CareRx

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

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

Diversification Opportunities for Disney and CareRx

-0.85

Correlation Coefficient

Disney  CareRx

Pay attention - limited upside

The 3 months correlation between Disney and CareRx is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and CareRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx 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 CareRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx has no effect on the direction of Disney i.e., Disney and CareRx go up and down completely randomly.

Pair Corralation between Disney and CareRx

Considering the 90-day investment horizon Walt Disney is expected to under-perform the CareRx. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 3.15 times less risky than CareRx. The stock trades about -0.19 of its potential returns per unit of risk. The CareRx is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  128.00  in CareRx on October 8, 2024 and sell it today you would earn a total of  12.00  from holding CareRx or generate 9.38% return on investment over 90 days.

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

Walt Disney  vs.  CareRx

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) 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.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Disney and CareRx

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

The idea behind Walt Disney and CareRx 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.