Correlation Between Disney and Mr Price

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

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

Diversification Opportunities for Disney and Mr Price

0.62

Correlation Coefficient

Disney  Mr Price

Poor diversification

The 3 months correlation between Disney and MRPLY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Disney i.e., Disney and Mr Price go up and down completely randomly.

Pair Corralation between Disney and Mr Price

Considering the 90-day investment horizon Walt Disney is expected to generate 0.28 times more return on investment than Mr Price. However, Walt Disney is 3.54 times less risky than Mr Price. It trades about -0.18 of its potential returns per unit of risk. Mr Price Group is currently generating about -0.11 per unit of risk. If you would invest  11,410  in Walt Disney on October 10, 2024 and sell it today you would lose (271.00) from holding Walt Disney or give up 2.38% 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.  Mr Price Group

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mr Price Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mr Price Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Mr Price is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and Mr Price

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

The idea behind Walt Disney and Mr Price Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.