Correlation Between Disney and Rithm Capital

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

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

Diversification Opportunities for Disney and Rithm Capital

-0.54

Correlation Coefficient

Disney  Rithm Capital

Excellent diversification

The 3 months correlation between Disney and Rithm is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Capital 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 Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of Disney i.e., Disney and Rithm Capital go up and down completely randomly.

Pair Corralation between Disney and Rithm Capital

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Rithm Capital. In addition to that, Disney is 5.88 times more volatile than Rithm Capital Corp. It trades about -0.13 of its total potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.21 per unit of volatility. If you would invest  2,420  in Rithm Capital Corp on December 20, 2024 and sell it today you would earn a total of  73.00  from holding Rithm Capital Corp or generate 3.02% return on investment over 90 days.

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

Walt Disney  vs.  Rithm Capital Corp

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Rithm Capital Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Rithm Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and Rithm Capital

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

The idea behind Walt Disney and Rithm Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.