Correlation Between Disney and China Gold

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

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

Diversification Opportunities for Disney and China Gold

0.37

Correlation Coefficient

Disney  China Gold

Weak diversification

The 3 months correlation between Disney and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International 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 China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of Disney i.e., Disney and China Gold go up and down completely randomly.

Pair Corralation between Disney and China Gold

Considering the 90-day investment horizon Disney is expected to generate 12.18 times less return on investment than China Gold. But when comparing it to its historical volatility, Walt Disney is 2.16 times less risky than China Gold. It trades about 0.01 of its potential returns per unit of risk. China Gold International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  326.00  in China Gold International on October 21, 2024 and sell it today you would earn a total of  250.00  from holding China Gold International or generate 76.69% 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.  China Gold International

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Gold International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, China Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and China Gold

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

The idea behind Walt Disney and China Gold 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.