Correlation Between Disney and CHIE

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

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

Diversification Opportunities for Disney and CHIE

-0.64

Correlation Coefficient

Disney  CHIE

Excellent diversification

The 3 months correlation between Disney and CHIE is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and CHIE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIE 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 CHIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIE has no effect on the direction of Disney i.e., Disney and CHIE go up and down completely randomly.

Pair Corralation between Disney and CHIE

If you would invest  9,577  in Walt Disney on September 30, 2024 and sell it today you would earn a total of  1,578  from holding Walt Disney or generate 16.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Walt Disney  vs.  CHIE

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.

CHIE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, CHIE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and CHIE

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

The idea behind Walt Disney and CHIE 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.