Correlation Between Disney and COVER
Can any of the company-specific risk be diversified away by investing in both Disney and COVER 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 COVER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and COVER, you can compare the effects of market volatilities on Disney and COVER 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 COVER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and COVER.
Diversification Opportunities for Disney and COVER
Excellent diversification
The 3 months correlation between Disney and COVER is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and COVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVER 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 COVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVER has no effect on the direction of Disney i.e., Disney and COVER go up and down completely randomly.
Pair Corralation between Disney and COVER
Considering the 90-day investment horizon Walt Disney is expected to under-perform the COVER. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.99 times less risky than COVER. The stock trades about -0.11 of its potential returns per unit of risk. The COVER is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,668 in COVER on December 28, 2024 and sell it today you would earn a total of 240.00 from holding COVER or generate 14.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 96.77% |
Values | Daily Returns |
Walt Disney vs. COVER
Performance |
Timeline |
Walt Disney |
COVER |
Disney and COVER Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Disney and COVER
The main advantage of trading using opposite Disney and COVER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, COVER 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 COVER will offset losses from the drop in COVER's long position.Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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