Correlation Between Disney and FG Merger

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

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

Diversification Opportunities for Disney and FG Merger

0.17

Correlation Coefficient

Disney  FG Merger

Average diversification

The 3 months correlation between Disney and FGMC is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and FG Merger II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Merger II 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 FG Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Merger II has no effect on the direction of Disney i.e., Disney and FG Merger go up and down completely randomly.

Pair Corralation between Disney and FG Merger

Considering the 90-day investment horizon Walt Disney is expected to under-perform the FG Merger. In addition to that, Disney is 11.24 times more volatile than FG Merger II. It trades about -0.11 of its total potential returns per unit of risk. FG Merger II is currently generating about -0.21 per unit of volatility. If you would invest  965.00  in FG Merger II on December 27, 2024 and sell it today you would lose (8.00) from holding FG Merger II or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	51.67%
Values	Daily Returns

Walt Disney  vs.  FG Merger II

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 conflicting 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.

FG Merger II

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Disney and FG Merger

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

The idea behind Walt Disney and FG Merger II 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.