Correlation Between Disney and NevGold Corp

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

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

Diversification Opportunities for Disney and NevGold Corp

-0.45

Correlation Coefficient

Disney  NevGold Corp

Very good diversification

The 3 months correlation between Disney and NevGold is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and NevGold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NevGold Corp 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 NevGold Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NevGold Corp has no effect on the direction of Disney i.e., Disney and NevGold Corp go up and down completely randomly.

Pair Corralation between Disney and NevGold Corp

Considering the 90-day investment horizon Walt Disney is expected to generate 0.11 times more return on investment than NevGold Corp. However, Walt Disney is 8.71 times less risky than NevGold Corp. It trades about -0.02 of its potential returns per unit of risk. NevGold Corp is currently generating about -0.05 per unit of risk. If you would invest  11,255  in Walt Disney on October 26, 2024 and sell it today you would lose (39.00) from holding Walt Disney or give up 0.35% of portfolio value over 90 days.

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

Walt Disney  vs.  NevGold Corp

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 uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

NevGold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NevGold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Disney and NevGold Corp

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

The idea behind Walt Disney and NevGold Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.