Correlation Between Disney and Canadian Palladium

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

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

Diversification Opportunities for Disney and Canadian Palladium

0.26

Correlation Coefficient

Disney  Canadian Palladium

Modest diversification

The 3 months correlation between Disney and Canadian is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Canadian Palladium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Palladium 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 Canadian Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Palladium has no effect on the direction of Disney i.e., Disney and Canadian Palladium go up and down completely randomly.

Pair Corralation between Disney and Canadian Palladium

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Canadian Palladium. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 7.77 times less risky than Canadian Palladium. The stock trades about -0.13 of its potential returns per unit of risk. The Canadian Palladium Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7.04  in Canadian Palladium Resources on December 29, 2024 and sell it today you would lose (2.19) from holding Canadian Palladium Resources or give up 31.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Walt Disney  vs.  Canadian Palladium Resources

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.

Canadian Palladium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Palladium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Palladium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Disney and Canadian Palladium

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

The idea behind Walt Disney and Canadian Palladium Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.