Correlation Between Disney and Gold Springs

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

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

Diversification Opportunities for Disney and Gold Springs

-0.31

Correlation Coefficient

Disney  Gold Springs

Very good diversification

The 3 months correlation between Disney and Gold is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Gold Springs Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Springs Resource 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 Gold Springs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Springs Resource has no effect on the direction of Disney i.e., Disney and Gold Springs go up and down completely randomly.

Pair Corralation between Disney and Gold Springs

Considering the 90-day investment horizon Walt Disney is expected to generate 0.21 times more return on investment than Gold Springs. However, Walt Disney is 4.73 times less risky than Gold Springs. It trades about 0.31 of its potential returns per unit of risk. Gold Springs Resource is currently generating about 0.02 per unit of risk. If you would invest  8,913  in Walt Disney on September 2, 2024 and sell it today you would earn a total of  2,834  from holding Walt Disney or generate 31.8% return on investment over 90 days.

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

Walt Disney  vs.  Gold Springs Resource

Walt Disney

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gold Springs Resource

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Springs Resource are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Springs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Disney and Gold Springs

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

The idea behind Walt Disney and Gold Springs Resource 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.