Correlation Between Disney and Peruvian Metals

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

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

Diversification Opportunities for Disney and Peruvian Metals

-0.41

Correlation Coefficient

Disney  Peruvian Metals

Very good diversification

The 3 months correlation between Disney and Peruvian is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Peruvian Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peruvian Metals 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 Peruvian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peruvian Metals Corp has no effect on the direction of Disney i.e., Disney and Peruvian Metals go up and down completely randomly.

Pair Corralation between Disney and Peruvian Metals

Considering the 90-day investment horizon Disney is expected to generate 1.54 times less return on investment than Peruvian Metals. But when comparing it to its historical volatility, Walt Disney is 6.55 times less risky than Peruvian Metals. It trades about 0.15 of its potential returns per unit of risk. Peruvian Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.45  in Peruvian Metals Corp on October 24, 2024 and sell it today you would lose (0.05) from holding Peruvian Metals Corp or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Walt Disney  vs.  Peruvian Metals Corp

Walt Disney

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Peruvian Metals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peruvian Metals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Peruvian Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Peruvian Metals

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

The idea behind Walt Disney and Peruvian Metals 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.