Correlation Between Disney and Fidelity Quality

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

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

Diversification Opportunities for Disney and Fidelity Quality

0.79

Correlation Coefficient

Disney  Fidelity Quality

Poor diversification

The 3 months correlation between Disney and Fidelity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Fidelity Quality Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Quality Factor 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 Fidelity Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Quality Factor has no effect on the direction of Disney i.e., Disney and Fidelity Quality go up and down completely randomly.

Pair Corralation between Disney and Fidelity Quality

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Fidelity Quality. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.01 times less risky than Fidelity Quality. The stock trades about -0.21 of its potential returns per unit of risk. The Fidelity Quality Factor is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,721  in Fidelity Quality Factor on September 24, 2024 and sell it today you would lose (76.00) from holding Fidelity Quality Factor or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Fidelity Quality Factor

Walt Disney

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Quality Factor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Factor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Quality is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Disney and Fidelity Quality

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

The idea behind Walt Disney and Fidelity Quality Factor 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.