Correlation Between Disney and Harding Loevner

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

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

Diversification Opportunities for Disney and Harding Loevner

0.35

Correlation Coefficient

Disney  Harding Loevner

Weak diversification

The 3 months correlation between Disney and Harding is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Harding Loevner International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Inte 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Inte has no effect on the direction of Disney i.e., Disney and Harding Loevner go up and down completely randomly.

Pair Corralation between Disney and Harding Loevner

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Harding Loevner. In addition to that, Disney is 1.34 times more volatile than Harding Loevner International. It trades about -0.07 of its total potential returns per unit of risk. Harding Loevner International is currently generating about 0.15 per unit of volatility. If you would invest  1,323  in Harding Loevner International on November 29, 2024 and sell it today you would earn a total of  88.00  from holding Harding Loevner International or generate 6.65% return on investment over 90 days.

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

Walt Disney  vs.  Harding Loevner International

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 comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Harding Loevner Inte

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Harding Loevner may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Disney and Harding Loevner

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

The idea behind Walt Disney and Harding Loevner International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.