Correlation Between Disney and Citizens Bancshares

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

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

Diversification Opportunities for Disney and Citizens Bancshares

0.29

Correlation Coefficient

Disney  Citizens Bancshares

Modest diversification

The 3 months correlation between Disney and Citizens is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Citizens Bancshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancshares Corp 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 Citizens Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancshares Corp has no effect on the direction of Disney i.e., Disney and Citizens Bancshares go up and down completely randomly.

Pair Corralation between Disney and Citizens Bancshares

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Citizens Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.73 times less risky than Citizens Bancshares. The stock trades about -0.07 of its potential returns per unit of risk. The Citizens Bancshares Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Citizens Bancshares Corp on November 28, 2024 and sell it today you would lose (76.00) from holding Citizens Bancshares Corp or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Walt Disney  vs.  Citizens Bancshares Corp

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 comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Citizens Bancshares Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Bancshares Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Citizens Bancshares is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Disney and Citizens Bancshares

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

The idea behind Walt Disney and Citizens Bancshares Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.