Correlation Between Disney and Network CN

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

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

Diversification Opportunities for Disney and Network CN

-0.38

Correlation Coefficient

Disney  Network CN

Very good diversification

The 3 months correlation between Disney and Network is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Network CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network CN 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 Network CN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network CN has no effect on the direction of Disney i.e., Disney and Network CN go up and down completely randomly.

Pair Corralation between Disney and Network CN

Considering the 90-day investment horizon Disney is expected to generate 146.6 times less return on investment than Network CN. But when comparing it to its historical volatility, Walt Disney is 127.43 times less risky than Network CN. It trades about 0.24 of its potential returns per unit of risk. Network CN is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Network CN on September 15, 2024 and sell it today you would earn a total of  5.86  from holding Network CN or generate 4185.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Walt Disney  vs.  Network CN

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.

Network CN

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Network CN

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

The idea behind Walt Disney and Network CN 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.