Correlation Between Disney and Rockridge Resources

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

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

Diversification Opportunities for Disney and Rockridge Resources

0.07

Correlation Coefficient

Disney  Rockridge Resources

Significant diversification

The 3 months correlation between Disney and Rockridge is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Rockridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockridge Resources 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 Rockridge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockridge Resources has no effect on the direction of Disney i.e., Disney and Rockridge Resources go up and down completely randomly.

Pair Corralation between Disney and Rockridge Resources

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Rockridge Resources. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 4.84 times less risky than Rockridge Resources. The stock trades about -0.13 of its potential returns per unit of risk. The Rockridge Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.02  in Rockridge Resources on December 29, 2024 and sell it today you would earn a total of  0.09  from holding Rockridge Resources or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	31.15%
Values	Daily Returns

Walt Disney  vs.  Rockridge Resources

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.

Rockridge Resources

Risk-Adjusted Performance

OK

Over the last 90 days Rockridge Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile essential indicators, Rockridge Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Rockridge Resources

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

The idea behind Walt Disney and Rockridge Resources 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.