Correlation Between Disney and Newhydrogen

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

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

Diversification Opportunities for Disney and Newhydrogen

-0.85

Correlation Coefficient

Disney  Newhydrogen

Pay attention - limited upside

The 3 months correlation between Disney and Newhydrogen is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Newhydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newhydrogen 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 Newhydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newhydrogen has no effect on the direction of Disney i.e., Disney and Newhydrogen go up and down completely randomly.

Pair Corralation between Disney and Newhydrogen

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Newhydrogen. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 14.57 times less risky than Newhydrogen. The stock trades about -0.08 of its potential returns per unit of risk. The Newhydrogen is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Newhydrogen on September 16, 2024 and sell it today you would lose (0.02) from holding Newhydrogen or give up 5.71% of portfolio value over 90 days.

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

Walt Disney  vs.  Newhydrogen

Walt Disney

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 18 (%) 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.

Newhydrogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newhydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Disney and Newhydrogen

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

The idea behind Walt Disney and Newhydrogen 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.